The Hindu Business Line : Effect of service tax

The proposed widening of the service tax base to include on banking and transport services, and the new definition of `business auxiliary services' is against the small-scale industries, trading community as well as the common man.

The net result of the expanding service tax, being an indirect tax, will be inflation, unnecessary litigation and harassment from the service tax department. Business auxiliary services will now bring job workers and ancillary units under the service tax net.

This are also contradictions in the proposed system. On the one hand, SSI manufacturing units with a turnover of less than Rs 1 crore are exempt from excise while, on the other, they will now have to pay service tax on job work from Re 1 onwards. They will also have to maintain new records, file returns and deal with another departmental inspection. SSI job work units that have long-term contracts with larger industries will find it very difficult to pass on this new tax to their customers.

Sushil Mehra

Bangalore

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