Service tax: Boon for UPA and Bane for consumer!

By ZRG | Last Updated: Friday, October 12, 2012 - 18:35

Siddharth Tak / Zee Research Group / Delhi

What began as a small tax levied on just three services has today come to be the key revenue earner for the government with UPA 2 recording a phenomenal growth in service tax collections so far during the last three plus years. The service tax regime was started by Dr Manmohan Singh on July 1, 1994, during his days as finance minister under P V Narasimaha Rao government.

The finance ministry, now again headed by Dr Singh, post the exit of Pranab Mukherjee from North Block, on Sunday (July 1, 2012) announced implementation of the expanded service tax item list. The service tax returns have paid dividends to the UPA government and hence the expansion is line with its policy to increase revenue collection. However, this comes at the cost of additional burden on the consumer who has now to pay service tax on almost everything that he or she consumes as a service.

ZRG profiles the journey of the service tax from a three item category in 1994 to it being levied on 120 items. With about two years to go for elections, will service tax levy ghost haunt the consumer or the government would ease up in its bid to woo the Indian middle class.

 

Service Tax Collection Journey: Pinch has just got bigger and bigger!

Year and Month

Political Party

Financial

Revenue

% Growth over previous year

No. of Services under  tax net

 Services tax Collection by Various government  (Rs. Crores)

Year

Rs. Crores

Indian National Congress

21 June
1991 to 16 May
1996

1994-95

410

3

3793

1995-96

846

106

6

Janata Dal led
United Front

1 June
1996 to 19 March
1998

1996-97

1022

21

6

1997-98

1515

48

18

Bharatiya Janata Party led National Democratic Alliance

19 March
1998 to 22 May
2004

1998-99

1787

18

26

21788

1999-00

2072

16

26

2000-01

2612

26

26

2001-02

3302

26

41

2002-03

4125

25

52

2003-04

7890

91

62

 Indian National Congress led
United Progressive Alliance

22, May 2004 to 22 May 2009

2004-05

14196

80

75

186566

2005-06

23053

62

84

2006-07

37482

63

99

2007-08

51133

36

100

2008-09

60702

19

106

22 May 2009 to current

2009-10

58336

-3.89

109

226676

2010-11

70,896

22

121

2011-12

97444

37

120

 

Major new services on which Indian consumers will need to pay  the services tax from 1st  July 2012

S.no

Services

Taxability of Services Tax

Non Taxability of Services tax

Rate of Tax

1

Postal

Speed Posts and express parcel were subjects to services tax from this month onwards

Basic postal services, pension payments, money orders etc remain exempt.

12 Per cent

2

Education

Private tuition providers will pay service tax if their annual turnover exceeds Rs 10 lakh.

 Entrance tests of Indian institutions such as IITs and IIMs will be exempt from services tax.

3

Airlines

 A single ticket bought (e-portal in India) for many overseas destinations are to be fully taxed.

But if somebody purchases separate tickets then, it is exempt from service tax.

4

Money Exchange

When currencies are changed, then forex dealers charge a commission. This commission will be subject to services tax.

Cash transactions are not subject to service tax.

5

Passport

Seeking help of agents to get a passport a visa, will get more expensive, as these services are charged for providing a services to 12 per cent tax.

Visa and passport issuing are sovereign functions and so fees charged by governments will not be taxed.

6

Entertainment

Artists engaged in western music or dance, modern theatres and television serials have to pay service tax.

The services offered by the unorganized sector remain exempt.

7

Cultural

Attending conferences, seminars, road shows of foreign education, workshops, sports and cultural events will be subject to service tax.

The services offered by the unorganized sector remain exempt.

8

Personalised

Services of marriage bureaus, astrologers, numerologists, designer clothes and accessories will be subject to service tax.

The services offered by the unorganized sector remain exempt.



First Published: Thursday, July 5, 2012 - 14:14

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