New Delhi: Finance minister Pranab Mukherjee expanded the list of activities covered by service tax and also extended the scope of coverage on some services already under the tax net.
Service tax receipts in 2009-10 will add up to Rs65,000 crore, according to Budget estimates; this is the only indirect tax which is expected to contribute as much as last fiscal’s receipts to the exchequer despite a 2 percentage point cut in the tax rate to 10% in February as a part of the stimulus package.
Four new services—legal consulting provided by firms, transportation of non-essential goods through railways, transportation of specified goods through coastal and inland shipping, and plastic surgery—have been added to the list of taxable services.
Bringing some of the freight transported by the railways under the service tax net was recently suggested by the chairman of the 13th finance commission, Vijay Kelkar, as a way to be even-handed in taxing different arms of the transport sector. The addition of new services and extension of the scope of taxation of some services assumes importance as service tax is one of the indirect tax items that will be subsumed in the goods and services tax (GST), scheduled for launch at the beginning of next financial year.
A major change has been the expansion of the scope of tax on installations, structures and vessels in the entire continental shelf of India and exclusive economic zones of India. According to a Budget analysis prepared by Mumbai-based legal firm Economic Law Partners, this proposal will increase the cost of existing drilling contracts.