News

21st June, 2006

Service tax net traps new depts

The fine print in the Finance Bill, 2006 has brought several government entities such as state police, Central Industrial Security Force (CISF), highways and the municipal corporations into the service tax net.

The inclusion of several government agencies under the ambit of the tax is on account of the words commercial concern in relation to 17 services being substituted with the words person, in the Budget. The change was made with the intention to expand the scope of the service provider.

The Directorate of Service tax has already written to the CISF, the Department of posts and the Directorate of Audio Visual Publicity asking them to pay tax with effect from April 18, the date on which the Finance Act was notified.

Government officials said that security services provided by the state police to individuals or to events in exchange for a remuneration would invite service tax.

Similarly, the CISF, which also charges money for providing security to government buildings and establishments, would also have to pay service tax on such remunerations.

Similarly, selling of space for advertisements by the municipal corporation, the railways and highways authorities will also be liable to service tax.

Officials said that services provided by the department of posts such as speed post, courier services, transfer of money and postal life insurance were also liable to service tax.

We are still in the process of identifying more government agencies and departments which would invite service tax following the changes made in the budget, an official said.