K.R. Srivats

New Delhi, July 4 The Budget could see the service tax rate revised upwards. The service tax collection in the first two months of the current fiscal has seen a decline.

Service tax collections in April-May 2009 stood at Rs 5,675 crore (provisional), reflecting a 7 percentage point decline over the collections of Rs 6,121 crore in the same period last year, official sources said. For 2009-10, the service tax collection target was pegged at Rs 68,900 crore (at the Interim Budget stage).

Govt to blame

The drop in the service tax collections could be partly attributed to the Government’s move in February to cut the service tax rate from 12 per cent to 10 per cent. The rate cut was announced by the Finance Minister, Mr Pranab Mukherjee, as part of the third round of stimulus measures to give a boost to the economy. The slowdown in the economy could also be a reason for the decline in service tax collections in the first two months of the current fiscal.

The Centre’s service tax collections during 2006-07, 2007-08 and 2008-09 stood at Rs 37,598 crore, Rs 51,301 crore and Rs 60,716 crore (provisional) respectively.

(This article was published in the Business Line print edition dated July 5, 2009)
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