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Service tax: Industry deplores hike
March, 17th 2012

The Union budget 2012 - 2013 evoked mixed response from the trade community in Madurai.

While the Tamil Nadu Chamber of Commerce and Industry (TNCCI) welcomed several aspects of the budget, the Madurai District Tiny and Small Scale Industries Association (MADITSSIA) termed it as a disappointing one.

"Finance minister Pranab Mukherjee has managed to present a responsive budget addressing the cross-sectional concerns of the tax payers, industry and the farmers," said TNCCI senior president S Rethinavelu. "The announcement that Goods and Services Tax Network (GSTN) will become operational by August 2012 is a welcome one. The highly proactive tax system which would subsume Central Excise, Service Tax and state-level value added tax would provide the tax set-off benefit to trade and industry even for the inter-state sales. As of now, traders cannot set-off service tax paid by them in the value added tax payable by them," he said.

However, TNCCI felt that there was no justification in raising the service tax rate and standard rate of excise duty from 10% to 12% at this stage as it will further burden the domestic industries and service providers and increase the cost of products and services and escalate the inflationary trend. The proposal to tax all services, except those in the negative list would lead to confusion and lead to unnecessary litigations and put entrepreneurs at the mercy of the tax officials. However, the proposal to introduce advance ruling system in Central excise levy and service tax will considerably reduce litigations.

"Yet another laudable feature of the budget is the slew of measures proposed to detect unaccounted money and the decision to table white paper on unaccounted money in current session of parliament," TNCCI president N Jegatheesan said. He also noted the proposal in the budget to bring down the excise duty rate from 10% to 6% for semi-mechanized safety match units which was based on the specific request made by TNCCI.

Meanwhile, MADITSSIA said the Union budget has not revealed any concession for medium and small-scale enterprises (MSME). MADITSSIA was also sore over the increase of excise duty and service tax from 10% to 12 % which it termed as a big blow to the MSME sector. "This will lead to price rise of all goods affecting ordinary and middle class people," said V S Manimaran, the association president.

"Though the Union finance minister had stated that MSME sector is the backbone of our economy and contributes to 40% of total production of India, the request made by association for interest subvention is not heeded to, which is disappointing," he said.

He said that the finance minister also failed to exempt exercise duty for semi-mechanized matches, reducing the duty by 4% despite request from the industry. However, MADITSSIA welcomed the 3% interest subvention for self-help group women for prompt payment and an additional 3% interest subvention for farmers.

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