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From new service tax list, Govt may pocket Rs 4,400 crore
March, 02nd 2011

Fresh levies imposed on services like eating out in restaurants, hotel stay, air travel, buying a life insurance policy and charges on legal services are likely to net the government an additional Rs 4,400 crore annually.

Bringing out 130 goods from the exempted category and imposing 1% excise duty on them will alone get the Central Board of Excise and Customs (CBEC) extra revenue of Rs 2,500 crore, according to revenue projections made for 2011-12.

The total earning from duty rejig in the excise category is likely to get the government an additional Rs 6,990 crore. CBEC chairman Sumit Dutt Majumdar said there was an effort to gradually bring all services under the service tax net to align them with the proposed Goods and Services Tax (GST), likely to be ipmlemented from April 2012 if states agree on the constitutional amendment.

For the first time, the government has brought restaurants, albeit airconditioned ones with bar licences, under the service tax net by imposing a levy of 3%. Revenue from this category is projected to be upwards of Rs 400 crore.

Hotel accommodation, those having tariff of Rs 1,000 and above per day, will be charged at 5%. Earnings from this category is likely to be Rs 500 crore.

Additional levy on airfares of Rs 50 on domestic travel and Rs 250 on international and 10% on business class is likely to generate more than Rs 500 crore. Earlier, domestic air travel attracted Rs 100 service tax while international travel cost an extra Rs 500.

Money changers too have been brought under the tax net with levy imposed on them likely to give the government at least Rs 400 crore annually.

Income projected on account of insurance polices (Rs 1,100 crore), and legal services will generate Rs 250 crore, besides Rs 550 crore from other services brought under the tax net.

While proposals on direct taxes are estimated to result in a revenue loss of Rs 11,500 crore for the year, proposals relating to indirect taxes are estimated to result in a net revenue gain that is likely to offset the entire loss. The estimated loss on direct taxes has been calculated after setting off gains made on account of additional revenue from MAT imposed on SEZ units.

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