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Govt hopes to mop up more resources from service tax
July, 26th 2008

The Government hopes to mop up more resources from the service tax, according to Mr P.C. Jha, Chairman of Central Board of Excise and Customs. The service sector contributes to more than 50 per cent of GDP while in terms of tax-GDP ratio, the share of the service tax is a meagre 1.1 per cent, Mr Jha observed while addressing the members of the Merchants Chamber of Commerce here on Friday, adding, there is, therefore, considerable scope for improvement in the share.

Asked if the Government was considering bringing more services under the ambit of the service tax, Mr Jha replied, it is difficult to say anything in this regard right now but according to an international manual, as many as 1,500 services could be taxed. .

The service tax in India, as he pointed out, was introduced in 1994 and in 1994-95, the tax rate was five per cent and three services were taxed and the Government raised Rs 410 crore on this score. In the past 14 years, the number of services being taxed has gone up to 106 and the Government earnings from the service tax many times more and the rate of tax too has been jacked up to 12.36 per cent.

In 2007-08, over Rs 51,000 crore was raised by way of service tax and the target for the current year has been set at more than Rs 64,000 crore. Judging from the trend so far in the current year, we hope to cross the target, he observed. In first two months, the collection has been over Rs 9,700 crore.

Referring to various measures initiated by the Government to ensure greater compliance, he said a compendium has been prepared explaining everything one needed to know about the service tax. Businessmen should read this booklet before heeding to the advice of their tax consultants, he said. Some of the complexities in the existing tax rules should be attributed to the complex behaviour of a section of businessmen.

If one pays taxes as per law, there will be no problem while the hassles of tax avoidance are not small, he said. We are responsive to your problems and our objective is not to create problems for you.

The share of indirect tax in the Governments total collection, as he pointed out, was declining which, he felt, was a good sign for the economy. In the current year, the total collection from various indirect taxes has been set at Rs 3,20,000 crore, to register a growth of about 14.1 per cent. However, the share of the indirect tax would drop 46.5 per cent from 47.5 per cent in 2007-08.


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