The government has said that the service providers should bear the increased taxes on water, electricity and telephone.

The budget proposals bring down the VAT for the industrial sector from 11 per cent to eight per cent, but raises for the services sector from 11 pc to 12.5 pc.

The NBT and the airport and port development levy have been raised from two pc to four pc and five pc to 7.5 pc respectively.

These increased taxes will begin to be effective from January, say Finance Ministry sources.