Service Tax base widened

Finance Minister Pranab Mukherjee has made an effort to widen the service tax base, strengthen its enforcement and bring it as close as possible to the central excise. A common simplified registration form and a common return are being introduced for central excise and service tax.

            All services will now attract service tax, except those in the negative list.  The negative list  has 17 heads and includes  specified services provided by the government or local authorities, and services in the fields of education, renting of residential dwellings, entertainment and amusement,   public transportation, agriculture and animal husbandry.  A number of other services including health care, and services provided by charities, independent journalist, sport persons, performing artists in folk and classical arts, etc are exempt from service tax.  Film industry also gets tax exemption on copyrights relating to recording of cinematographic films.

Service tax rate is being increased from 10 per cent to 12 per cent, with consequential change in rates for services that have individual tax rates. The standard rate of excise duty for non-petroleum goods is also being raised from 10 per cent to 12 per cent. No change is proposed in peak rate of customs duty of 10 per cent on non-agricultural goods.

The Budget offers relief to different sectors of economy, especially those under stress.  Import of equipment for fertilizer projects are being fully exempted from basic customs duty of 5 per cent for 3 years.  Basic customs duty is also being lowered for a number of equipment used in agriculture and related areas.  

In the realm of infrastructure, customs relief is being given to power, coal and railways sectors.  While steam coal gets full customs duty exemption for 2 years (with the concessional counter-veiling duty of 1 per cent), natural gas, LNG and certain uranium fuel get full duty exemption this year.  Different levels of duty concessions are being provided to help mining, railways, roads, civil aviation, manufacturing, health and nutrition and environment.  So as to help modernization of the textile industry, a number of equipment are being fully exempted from basic customs duty, and lower customs duty is being proposed for some other items used by the textile industry. 

Customs duty is being raised for gold bars and coins of certain categories, platinum and gold ore.  Customs duty  is to be imposed on coloured gem stones.  Excise duty on certain categories of cigarettes and bidis, pan masala and chewing tobacco is being increased.  Customs duty is being increased  on completely built large cars/ SUVs/ MUVs of value exceeding $40,000. 

Silver jewellery will now be fully exempt from excise duty. Unbranded  precious metal jewellery will attract excise duty on the lines of branded jewellery. Operations are being simplified and measures taken to minimize impact of this provision on small artisans and goldsmiths.

While direct tax proposals in the Budget will result in a net revenue loss of Rs.4,500crore, indirect taxes will result in a net revenue gain of Rs.45,940 crore.  Thus, the tax proposals will lead to a net gain of Rs.41,440crore.