New Delhi: A host of banking services like pay-orders, demand drafts, safe deposit lockers, safe vaults and insurance cover have become costlier following levy of Service Tax and Education Cess from September 10.

Services offered by sub-brokers, non-bank financial companies, multi-system operators of cable TV, tour operators have also become costlier.

The Government has notified the new services brought under the tax net after President A P J Abdul Kalam gave his assent to the Finance Bill on Friday night (Sep 10, 2004).

Accordingly, the eight new services category will now attract 10 per cent Service Tax and a 2.0 per cent cess on it.

Commission charged for banking services like issue of pay orders, demand drafts, cheque, letter of credit, bill of exchange, bank guarantee, overdraft facility, bill discounting facility, safe deposit lockers, safe vaults and operation of bank accounts, would go up by 10.2 per cent, a senior bank official said.

The extra charges would be have to borne by consumers, he said, adding if a bank is offering these services free of cost then the consumer need not pay the tax.

Banks are, however, exempted from the service tax for handling Government businesses like collection of taxes levied by Central and State Governments.

In case of insurance, the Government has given an option-- either pay 10.2 per cent on the risk cover or pay 1.0 per cent of the gross premium.

The other services that will now attract service tax include companies including NBFCs (Non-Banking Financial Corporation) offering financial services.