Consumers paying 12% service tax on food bills at restaurants, on cable television charges and on most other services could expect some relief.
The government is examining if service tax paid by the final consumer could be moderated while retaining the rate of service tax paid by industries and business houses at the current level. Businesses get credits on the taxes paid on input services and goods.
The idea is to give some reprieve to the consumer, who has to bear the service tax levied by the Centre, value-added tax (VAT) levied by the state and also the impact of all other indirect taxes that get built into the value of a purchase or consumption that diminish his spending capacity in a slowing economy.
“It is not fair to burden one class of assessees too much. The tax system should be equitable,” said a person privy to the government's plan, which is at a preliminary stage.
Revenue from service tax, now levied on all items except those on a negative list and an exemption list, has been growing faster than other forms of taxes. Service tax collection, which rose 34% last fiscal from a year earlier, is expected to grow at 31% this financial year. Its share in the gross tax receipts too has grown sharply from 3% in 2003-04 to an estimated 12% this fiscal, making the finance ministry wonder if it is affecting consumption in the economy and thereby adversely affecting a potentially higher realisation in indirect tax receipts and in corporate income tax.
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The government is examining if service tax paid by the final consumer could be moderated while retaining the rate of service tax paid by industries and business houses at the current level. Businesses get credits on the taxes paid on input services and goods.
The idea is to give some reprieve to the consumer, who has to bear the service tax levied by the Centre, value-added tax (VAT) levied by the state and also the impact of all other indirect taxes that get built into the value of a purchase or consumption that diminish his spending capacity in a slowing economy.
“It is not fair to burden one class of assessees too much. The tax system should be equitable,” said a person privy to the government's plan, which is at a preliminary stage.
Revenue from service tax, now levied on all items except those on a negative list and an exemption list, has been growing faster than other forms of taxes. Service tax collection, which rose 34% last fiscal from a year earlier, is expected to grow at 31% this financial year. Its share in the gross tax receipts too has grown sharply from 3% in 2003-04 to an estimated 12% this fiscal, making the finance ministry wonder if it is affecting consumption in the economy and thereby adversely affecting a potentially higher realisation in indirect tax receipts and in corporate income tax.
Read More . . . . .