Option 1 states that the service tax rate was raised and now covers all services, including those in the negative list. This means that previously exempt services are now subject to service tax. Therefore, option 1 is correct.

Option 2 states that there is an increase in the defense allocation compared to the previous year. This implies that more funds have been allocated to the defense sector. Therefore, option 2 is correct.

Since both options 1 and 2 are correct, the correct answer is option 3 - Both 1 and 2. The budget proposals for the year 2012-13 included raising the service tax rate and expanding its coverage, as well as increasing the defense allocation.