Get ready to pay tax on every service barring those in some 20 categories such as construction, health, entertainment, restaurants, non-AC rail fares, travel by the metro or public buses, etc. A key official says the way has been cleared to bring this proposal in the Budget, as the finance ministry has agreed to take states’ concerns on board. Services constitute more than 60 per cent of India’s GDP, but are projected to contribute just 8.7 per cent of the Centre’s gross tax revenue in the Budget estimates for 2011-12. That is because service tax is a relatively new area in India. There was no tax on tertiary activities before 1994, when only three services came under the net. Progressively, the net has widened to include over 125 services under its ambit, but that too is minuscule relative to their size in the economy. Analysts believe this step would alone increase service tax collections 20-25 per cent, which would help in narrowing the fiscal deficit.
Source: Business Standard
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