There is a strong possibility that the forthcoming Budget might see an increase in the service tax rate from the current 12% to almost 14%.

The move is a part of the compensation package agreed upon by the union and state governments for phasing out the Central Sales Tax levied on inter-state trade. This is being seen as a precursor to a hike in the service tax rate.

Besides, 44 new items including lending services, sports, health, hotel and lodging, electricity distribution, education, and artistic performances, including those by movie stars are also likely to be brought under, the service tax net.

The move towards phase-out of CST is seen as part of a strategy to eliminate multiple taxes and move towards a common tax -- the proposed goods and service tax.