Keep distribution outside service tax ambit: Power producers
February, 22nd 2012
To avoid any increase in consumer tariffs, domestic power producers have pitched for keeping generation, transmission and distribution companies outside the service tax ambit.
Any imposition of service tax will add to consumer tariffs, an industry official said, adding that it will also worsen the finances of the distribution companies, that are already saddled with huge losses.
In some of its key suggestions to the Finance Ministry for Budget 2012-13, the sector, which is seeing a strain on its input costs because of high fuel prices, has asked that these services be a part of the proposed negative list.
The Association of Power Producers has written to the Finance Secretary, Mr R. S. Gujral, earlier this month raising certain concerns.
Referring to the concept paper on Taxation of Services Based on a Negative List of Services' the Association said that the paper mentions that the supply of electricity may be specified as not comprising supply of services. But there is no discussion about the services provided by distribution companies, which are exempted by the Central Government in public interest.
All taxable services provided to any person by a distribution licensee, a distribution franchisee, or any other person, by whatever name called, authorised to distribute power under the Electricity Act, 2003, for distribution of electricity should be kept outside the purview of service tax, it says.
The revised concept paper brought out by the Finance Ministry proposes a total of 22 services, or groups of services, which will be free from service tax.
In its letter to the Finance Secretary, the Association has said electricity should be included in the goods and services tax (GST).