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Service tax to pinch more

Source : BUSINESS_STANDARD
Last Updated: Sat, Mar 17, 2012 04:03 hrs
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Finance Minister Pranab Mukherjee has increased the service tax to 12 per cent from 10 per cent and taken a big step towards the implementation of the Goods and Services Tax by introducing, for the first time, a negative list of 17 services that are to be kept out of the service tax net.

The increase in service tax is expected to yield additional revenues of Rs 18,650 crore and revenue buoyancy is expected to account for the rest. All in all, the government expects to collect Rs 1,24,000 crore in the coming financial year over the revised estimates of Rs 95,000 crore in the current financial year and Rs 71,016 crore in 2010-2011. The finance minister also said availability of full Cenvat credit is being allowed.

Mukherjee said the negative list had been “carefully drawn up, keeping in view the federal nature of our polity, the best international practices and our socio-economic requirements”.

The negative list contains services offered by the government or local authorities, and services in education, renting residential dwellings, entertainment and amusement, public transport, agriculture and animal husbandry.

Mukherjee also announced a list of services exempted from service tax like healthcare, and services provided by charities, independent journalist, sport persons, performing artists in folk and classical arts are exempt from service tax. The film industry also got tax exemption on copyrights relating to the recording of cinematographic films.

Services in the exempted category implies that they require a separate notification to qualify for exemptions.

On service tax on life insurance services, if the entire premium is not towards risk cover, then the first year’s premium will be taxed at the rate of 3 per cent, while subsequent premia will attract tax at the rate of 1.5 per cent. Transport of passengers visiting India for domestic and international journeys by air would attract an ad-valorem rate of 12 per cent, with abatement of 60 per cent in the case of economy travel. The dual rate structure of maximum service tax of Rs 150 and Rs 750 for economy class travel has also been proposed in the Budget.

“As far as service tax is concerned it is within the acceptable limits to my mind, given the fact that services sector contributes 59 per cent to the GDP. And for the increase in service tax, we will make a scheme that will make refund easier,” commerce and industry and textiles minister Anand Sharma told reporters after the Budget was presented.




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