Centre plans common tax norm for service sector

NEW DELHI: The government is toying with the idea of introducing a common legislation on taxation of the service sector for which amendment of the Constitution’s Seventh Schedule is on the cards.
The finance ministry has veered around the view that service tax should be brought under the Concurrent List with a band on the tax rates that could be imposed by states.
“The empowered committee of state finance ministers have submitted certain proposals on sharing service tax base with states. Implementation of these proposals would involve amendment to the Seventh Schedule of Constitution,� Central Board of Excise and Customs (CBEC) member AK Singh told a Assocham seminar on taxation here.
According to Singh, a comprehensive tax net for the service sector would need to bring under it important areas of the service economy — transport, rail, road and water transportation of passengers and goods, as well as auxiliary/support services, mining, power distribution and a host of other services.
He added that even at the current modest rate of 5 per cent taxation, comprehensive coverage will yield Rs 20,000 crore revenue per annum.
He also stressed on the need to evolve a road map for comprehensive Central value-added tax (Cenvat) on goods and services. Referring to the proposal of a common Cenvat on goods and service, Mr Singh said “the present rate of 5 per cent could be retained for the time being.
However, a revenue-neutral rate could be worked out for integration of service tax with Cenvat on goods.�
Within nine years of introduction, revenue from service tax have increased 15-fold from Rs 410 crore in ’94 to an estimated Rs 6,000 crore this fiscal.
Top five sectors — telephone, insurance, stock broking, advertisers and couriers — contribute 80 per cent of the total service tax mop up.