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Fresh tax imposts prescribed in the Union Budget 2011-12 could go to make Kerala a costlier destination for tourists.
If specific proposals pertaining to services provided by ‘air-conditioned' hotels, hospitals and diagnostic labs were bad enough, service tax on air travel came as a bolt from the blue, according to leading tax practitioners with KPMG.
SERVICE TAX
The Finance Minister has declared that air-conditioned bars will have to pay three per cent of the tab as service tax.
He has also sought to make staying at hotels costlier, effectively levying a five per cent service tax on hotel accommodation with a tariff of over Rs 1,000 a day.
These would make a visit to ‘God's Own Country' that much more costly an affair, according to Mr Sachin Menon, Executive Director; Mr S. Srinath, Director; and Mr Venkatesan R. Director, KPMG.
Overall, the Budget has been a good balancing act topped with an honest effort at guiding the migration of the economy to the Direct Taxes Code (DTC) and Goods and Services Tax (GST) regime by the next financial year.
DIRECT TRANSFER
Direct cash transfer in lieu of subsidy to the poor, if implemented in right earnest and purpose, could save the leakage of precious funds, variously estimated as 60 to 70 per cent, out of the system.
There is an anomaly in existing units in SEZs being asked to pay minimum alternate tax at increased rates, but this could likely be rolled back, according to Mr Venkatesan.
The Finance Minister's effort to rationalise State Value-Added Tax with Central Excise is laudable, according to Mr Sachin Menon.
It is only in the fitness of things that the services sector, which accounts for 57 per cent of the GDP and contributes too small a share in terms of tax collected, is being progressively targeted for expanded coverage.
PATH-BREAKING
According to Mr Srinath, the Finance Minister has taken a path-breaking reform by announcing self-assessment in Customs.
This is expected to quicken the clearance of the cargo by Customs authorities and further modernise the Customs administration.
Under this scheme, the importers and exporters will themselves asses their duty liabilities while filing their declarations.
The department will verify such assessments on a selective system-driven basis. But penalties for non-compliance would be very tough, Mr Srinath added.
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