The Hindu Business Line : Scope of service tax widened

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New Delhi Feb. 28 The Finance Minister, Mr P. Chidambaram, has proposed to widen the service tax net to more categories in this Budget. Services outsourced for mining of mineral, oil or gas, renting of immovable property for use in commerce or business, development and supply of content for use in telecom and advertising purposes, asset management services provided by individuals, and design services have been brought under the fold of service tax.

Service tax will also be levied on services involved in execution of a works contract. He has also proposed to double the exemption limit for small service providers to Rs 8 lakh. The revenue loss from the hike in the exemption limit will be Rs 800 crore, the Finance Minister said. "I am happy to give this sum away in the interest of small service provider and consumer," he said.

The Finance Minister also made a proposal for an optional composition scheme under which service tax will be levied at only 2 per cent of the total value of the works contract. Services provided by Resident Welfare Associations to their members who contribute Rs 3,000 or less per month have been exempted from paying the tax.

Trial of new drugs

Service tax will also be exempted on clinical trial of new drugs and services provided by technology business incubators. "The incubators whose annual business turnover does not exceed Rs 50 lakh will be exempted from the tax for the first three years," he added.

The services whose scope have been modified are sale of space in business directories, yellow pages and trade catalogues which are primarily meant for commercial purposes under sale of space or time for advertisement services, renting of motor vehicles capable of carrying more than 12 passengers under rent-a-cab service, services provided in relation to marriage functions under mandap keeper services, pandal or shamiana service and event management services.

The scope of computer hardware engineering consultancy under consulting engineering services has also expanded. The scope of services which has been amended are banking and other financial services so as to substitute the words `any other person' with `commercial concern' in the definition of taxable service, include cash management within its scope and explain the term financial leasing.

He also proposed amendment to management consultant service so as to rename it as management or business consultant service and to include explicitly business consultancy within its scope.

Manpower service

The Budget proposal also clarified that recruitment or supply of manpower service include services in relation to pre-recruitment screening, verifying the credentials and antecedents of the candidate and authenticity of documents submitted by the candidates.

Goods referred to in management, maintenance or repair service includes computer software.