The Hindu Business Line : Service tax hiked to 10 pc; list expanded

THE UPA Government has expanded the service tax net to include 13 more services besides enhancing the rate from eight per cent to 10 per cent. Currently, 58 services are taxable.

The new services are business exhibition services, airport services, transport of goods by road (by goods transport agencies), transport of goods by air, survey and exploration of minerals, opinion poll services, intellectual property services other than copyrights, forward contract service, outdoor catering, pandal or shamiana service, outdoor catering, TV or radio programme production, travel agents (other than air/rail travel agents) and construction services with respect to commercial or industrial buildings or civil structures.

The Government has budgeted a target of Rs 14,150 crore towards service tax for 2004-05 on the back of the enhanced rate and expanded net. The revised estimate of service tax for 2003-04 is at Rs 8,300 crore.

The Government has also come up with an amnesty of sorts for certain service tax assesses who have not registered themselves with the excise department. The mandatory penalty for non-registration is being removed.

Further, no penalty would be imposed on all cases of bona fide procedural infringements.

As far as the two per cent education cess on the service tax is concerned, the cess paid on input services would be available as credit for payment of cess on output services.

In an industry-friendly move, the Finance Minister, Mr P. Chidambaram, also announced in his Budget speech that the Government proposes to extend the credit of service tax and excise duty across goods and services (cross-vatability of goods and services).

Besides, existing service tax exemptions have been removed, with immediate effect, on a host of services.

These include services on safe deposit lockers and vaults, broadcasting services provided by cable operators; maintenance or repair of computers under maintenance contract or by the manufacturer, mandap keeper services provided by hotels (40 per cent abatement to be allowed if catering is also provided), and commission agents. Further, the scope of service tax is being widened in several services including financial services.

Commission and installation of plants, machinery or equipment would include erection thereof, stockbrokers would include sub-brokers, and cable operator service would include multi-system operators.

In life insurance, service tax is being restricted to risk cover. Mr Chidambaram clarified that there was no intention to levy service tax on truck owners or truck operators. "Nor, as was clarified by my predecessor, is there any intention to levy service tax on the savings part of the premium collected by an insurer."

Compulsory verification of assessment by department officers is also being done away with.