Withdrawal of exemption to dramatically widen scope of service tax from tomorrow
By Akhil Arora
THE fine
print of budget 2006-07 escpecially that of service tax will provide clues to
the analysts as to wherefrom the resources for all the outlays on infrastruture
and anti-poverty programmes going to come. The raising of tax bar from 10% to
12% should not take by surprise all those who were watching the collection trends
as CENVAT credit on service tax had started to make a whole in the pockets of
exchequer and it was only a matter of time that a stitch was put in place to
effectively earn atleast 10%.
What will eventually and gradually make everyone take note of is the fact that
by defining and redefining existing services, the ambit has been considrably
widened and the present number of about 100 covered services has at best now
a cosmetic value only. Consider the following changes for instance which become
effective from tomorrow only and which have become applicable on withdrawl of
exemptions:
++ all insurance business on which premium is booked outside India are now covered.
++ all services provided by Chartered Accountants, Company Secretaries, Cost
Accountants and stautory certification services are now covered.
++ all call center services or a medical transcription service provided by the
centres.
++ service provided by Enterprise Resource Planning Software system rendered
by a management consultant
++ all catering services provided on a railway by an outdoor caterer.
++ all catering services provided within the premises of an academic institution
or a ahospital by an outsider
Again, the reference to a `commercial concern' will be substituted with`any
person' in the Finance Act, 1994. And its first fall-out is going to be on Business
Auxuliary Service which now also includes individual brand ambassador service.
Apart from above, new services to be covered after passing of the Finance Bill,
2006 shall include:
Services relating to registrar to an issue, share transfer agents, ATM operations
including mainatainence or management, recovery agency services, sale of advertising
space or time, sponsership services except for sports, Air transport of passengers
embarking for international travel (except for economy class passengers), transport
of goods in containers by rail (except by Indian Railways), Business support
servises (sc ope is really comprehensive as it includes transaction processing,
routine administration or accountancy, customer's relationship and tele marketing,
secretarial assistance and all business service center services as also all
outsourced services), Auctioneer's service, Public relation services, ship mangement
services, internet telephony services, transport by cruise ships and credit
card related services.
One really ponders - Is it not the time to have a negative list for service
tax, but then `maya' is all about creating illusions - even if it
is perceived as the mastery of creating `dream' budget.