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Service tax field offices quadrupled to boost revenue
November, 06th 2014

To boost tax revenue from the services sector, which now accounts for more than half of the country’s $1.8-trillion economy, the government has raised the number of large field offices — commissionerates — exclusively dealing with service tax nearly fourfold to 23.

According to sources, creation of most of these additional posts (each will be aided by about 400 supporting staff) is more or less complete and orders about filling of vacancies have been issued to directors general and chief commissioners handling indirect taxes.

With this, Mumbai — which accounts for about half of the service tax receipts — will have seven commissionerates exclusively dealing with this tax, while Chennai and Delhi will have four each.

This is a substantial increase from the six such offices the country so far had in six major cities including Kolkata, Ahmedabad and Bangalore. The idea is to have one commissionerate for every 15,000 taxpayers, an official source said.

The finance ministry has been gradually increasing the rate of service tax as well as its coverage, which led to its share in the overall indirect tax receipts expanding sharply over the years. For example, online advertisements that were brought into the service tax net from October 1, 2014, are expected to add about Rs 400 crore to service tax receipts in a year. The government may further prune exemptions and the items in a negative list of services that are specifically excluded from this tax as the country embraces a goods and services tax.

Service tax, introduced in 1994, had witnessed exponential rate of growth initially, but this has moderated over the years although it is still faster than the growth in excise and customs duty receipts.

Tax collection from services, which in 2003-04 had shown a 91% annual growth to Rs 7,890 crore and had accounted for just 5% of total indirect tax receipts, is projected to grow at 30% this fiscal to Rs 2.2 lakh crore or 35% of the overall indirect tax proceeds. Service tax is also projected to exceed the receipts from excise and customs duties by a small margin this fiscal.

In the initial months of this fiscal, service tax collection had shown a spectacular growth of about 25% but has slowed down recently. In the April-September period, receipts from this category expanded by 13%.

Sources said that deployment of a field force for service tax would be more in cities, while the same for excise duty would be more in other areas in line with the changes in the trends in economic activity.

 
 
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