In June, India's service sector activity contracted for the first time since May 2018 from weak sales, competitive pressures and unfavourable taxation that hampered output, according to a private monthly survey.

The IHS Markit India Services Business Activity Index fell from 50.2 in May to 49.6 in June as stagnant sales led to a drop in activity for the first time in over a year. In measuring the PMI, the above 50-mark means expansion while a score below that signifies contraction.

"The latest PMI results for India bring some concerns over the sustainability of the relatively robust growth rates seen at the start of the year, and the ability of companies to create jobs," said Pollyanna de Lima, Principal Economist at IHS Markit.

"It's somewhat surprising to see some companies linking subdued demand to high tax rates, two years on from the GST implementation, with the hotel tax mentioned in particular," Lima further said.

Earlier this week, the survey data showed that manufacturing PMI eased to 52.1 in June from 52.7 in the previous month. The IHS Markit India Composite PMI Output Index, that maps both the manufacturing and services industry, dropped from 51.7 in May to 50.8 in June, its lowest mark in over a year.