Monday, February 28, 2011

Service Tax Provisions to be Rationalised

Rs. 4000 Crore Net Revenue Gain Through Service Tax Envisaged in 2011-12
Union Budget 2011-12 estimates to make net revenue gain of Rs. 4000 crore for the year by way of new Service Tax proposals. In keeping with thrust to encourage voluntary compliance, the penal provisions of Service Tax are under the process of rationalization. This will ensure less harsh treatment to those who have maintained truthful records but fallen short of discharging their tax liability. Deliberate evaders with un-recorded business transactions will be dealt with more severely. This was stated by the Union Finance Minister, Shri Pranab Mukherjee here today in his Budget Speech in Lok Sabha today.

Shri Mukherjee underlined that the strength of good value added tax lies in the free flow of the credit of the tax paid at the previous stage. In view of the legal disputes on the availability on a number of inputs or input services due to inherent complexities in the tax structure, it has been proposed to rationalize this by laying down clear definitions of the scope of inputs and input services and those that are not. Allocation of CENVAT credit to exempt and taxable goods and services is also being streamlined.

Accommodating the view of experts to tax services based on a small negative list so as to bring in many untapped sectors in the tax net, the Finance Minister proposed to initiate a public debate on the subject to facilitate finalization of approach to GST.

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