Run up to the budget 2008-09 Lower inflation may prompt a rates rise too. About a dozen new services are likely to be brought under the service tax net from fiscal 2008-09, even as the rate could be increased from 12 per cent. Last year, the government had considered raising the rate to 14 per cent but the move was shelved on account of fears of inflation, which was ruling at 6.5 per cent in January 2007.
TAXING TIMES
All unaided
non-government schools and colleges, unaided non-government hospitals and
amusement parks will be brought under the service tax net
To tax all these
services, the Finance Act 1994 is expected to be amended in the coming Budget
session.
An increase in
the service tax ambit and possibly the rate is seen as a precursor to the
introduction of a dual Goods and Service Tax (GST) from April 2010 onwards. For
the week ended December 29, the inflation rate stood at 3.5 per cent, raising
the possibility that service tax rates will increase. The new services
likely to be included in the service tax net are legal draft writing and stamp
paper vending, all unaided non-government schools and colleges, unaided
non-government hospitals, amusement parks and similar attractions,
coin-operated amusement machines and other recreation and amusement services.
These six new services have been recommended for inclusion in the list of
taxable service by the Empowered Committee of State Finance Ministers from
2007-08 onwards. Several other services are also likely to be brought under the
service tax net, which now covers 100 services. To tax all these services, the
Finance Act 1994 is expected to be amended in the coming Budget session. A
constitutional amendment may also be needed to insert an enabling provision
giving state governments powers to levy service tax, a key demand of the
states. "States are already allowed to collect and appropriate service
tax. However, they do not have the powers to levy the tax," a government
official explained. An increase in the service tax ambit and possibly the rate
is seen as a precursor to the introduction of a dual Goods and Service Tax
(GST) — at the state and central levels from April 2010 onwards. Besides
getting a 30.5 per cent share from 67 services, states receive the entire
revenue from 33 services from 2007-08 as part of a compensation package to
phase out central sales tax by 2010. The central government has also agreed to
transfer 44 new services to the states for taxation. – www.rediffnews.com