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.