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Govt may cut service tax
March, 04th 2010

The government may lower the proposed 10 per cent service tax rate on domestic and international air travel, even as it ruled out any rollback in the oil prices.

We are holding talks on the service tax issue with all air carriers and stakeholders. We should arrive at a rate that is not too excessive and does not put undue burden on passengers, Central Board of Excise and Customs chairman V Sridhar indicated on Wednesday during a post-Budget interaction with ASSOCHAM.

The Budget 2010-11 has proposed a service tax of 10 per cent on both domestic and international air travel. The aviation industry reacted sharply to the hike and urged the government to reduce it.

The Budget, while proposing to further widen the umbrella of service tax, also expanded the scope of airport services tax by including facilities provided within the airport premises.

Meanwhile, the Centre on Wednesday firmly ruled out any rollback in oil prices and made it clear to its allies not to expect any changes in the proposals made in the Budget.
Finance Minister Pranab Mukherjee, who spoke to the Congress MPs and later to a group of leaders of the UPA allies on Wednesday, explained to them the rationale behind the governments well thought-out decision to hike fuel prices.

 The allies, including the Trinamool Congress and the DMK, which had sought a rollback of fuel prices, seemed to be accepting the government decision. This was reflected in what Trinamool MP Sudip Bandopadhyay told Deccan Herald after the meeting: It is up to the prime minister to take a decision. We will accept his decision.

Congress president Sonia Gandhi, who will address the Congress Parliamentary  Party on Thursday, is likely to give the final assent of the party to go ahead with the no rollback decision. The Thursday meeting will end the series of discussions that the Congress brass is having over the fuel price hike. The first meeting, that of the Congress core committee headed by Gandhi, was held on Tuesday.


The two Houses of Parliament saw repeated adjournments on Wednesday as a united Opposition did not allow any business to be transacted during the first half of the day.

Opposition members in both Houses were on their feet demanding withdrawal of the petrol and diesel price hike. Samajwadi Party members trooped into the well and raised slogans. They were joined by the BJP members who shouted, Yeh sarkar nikammi hai (This government is incompetent) and jo sarkar nikammi hai woh sarkar badalni hai (an incompetent government needs to be changed).

In the Rajya Sabha, the BJP, SP, AIADMK, BSP and the Left members disrupted the proceedings immediately after obituary references were made and a member took oath.
Mukherjee explained that any reduction would turn haywire its plans for higher economic growth as also lowering fiscal deficit.

He told the allies that there was nothing wrong in the decision as the government only withdrew partially the reduction given in the excise duty earlier. The decision was taken with an eye on achieving the GDP growth and minimising fiscal deficit.

The minister said he had sought to increase the purchasing power of the middle class through income tax concessions in the budget and the government needed to mop up resources for its rural and social sector welfare programmes.

Mukherjee pointed out that when the NDA was in power, it had raised the prices of petrol 21 times, that of diesel 24 times and LPG five times.

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