Govt to bring more services under tax net

The Finance Ministry plans to bring more professions in the services sector under the tax net, a senior bureaucrat said here today.

He was speaking at a service tax-related event organised by the Associated Chambers of Commerce and Industry of India (Assocham).

“More areas in the services sector need to be brought under service tax. In India, this is tougher to do, because goods are sometimes classified as services and vice versa. The Centre has shown commitment to implement Goods and Service Tax (GST), which will subsume most of the indirect taxes like excise duty and service tax at the central level, as well as VAT on the state front, besides local levies,” the Ministry of Finance Joint Secretary, Mr V.K. Garg, said.

“Very soon, there will be an announcement by the Union Finance Minister on a negative list of taxation. We have drawn up a negative list of taxation about what we do not and should not tax. Once we are sure of this, everything else which is not included in this list can be brought under the tax net,” he added.

He said that taxation is important for any country and if taxation fails, it leads to deficits and inflation, which is the worst kind of taxation.

He also said that if taxes are improper, economic activity would end up getting distorted. Similarly, if import duties are high, then local businessmen will enjoy protection and a monopoly, which will result in customers suffering, he said.

“In India, even defining certain economic activities as a service is not easy, because the constitution does not recognise several such activities as service. So, there is a challenge even at the definition level,” Mr Garg said.

“Currently, only a limited number of services are under the tax net. The Government proposes to tax most of the services under the GST regime. A Constitution Amendment Bill is pending in Parliament, which seeks to pave the way for introduction of GST. The idea is to implement the GST regime by the year 2013,” he said.

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