Govt may fix Rs 10 lakh service tax threshold

NEW DELHI: Hereâ€™s some news thatâ€™ll cheer small businesses. The tax on services, which the finmin proposes to widen extensively, may come with a threshold. While the CBDT and CBEC are yet to work out the threshold, it is not expected to be lower than Rs 10 lakh. This means that shops, establishments and other service providers with a turnover of less than Rs 10 lakh will be spared from paying service tax. The Rs 10 lakh threshold may help the government achieve its objectives â€” rationalisation of tax structure and widening of tax net â€” without ruffling too many feathers. A study commissioned by the government showed that receipts from 79% of excise assessees account for just 3%, while 21% assessees contribute 97% of revenues. Given this backdrop, leaving out small units and entrepreneurs will not make much difference. Also, the government will be spared the trouble of dealing with resistance. The government is also working out a list of services that will be exempted from the service tax loop. These include BPOs, financial services like banks and insurance, all school education up to class twelve or equivalent, all essential medical and family welfare services, all public utility services of essential nature like water supply and all public services of government including civil administration, defence and police. The exemption list may also cover computer and related services, rural housing, lower and middle income group housing. The government may also consider leaving out computer and related services â€” consultancy services related to installation of hardware, software implementation services, data processing services and data based sevcoes â€” from the tax net. The entertainment services that could be spared include live bands and theatre. The decision to fix a threshold will be in keeping with the recommendation of the Govind Rao Committee on services tax. The Commission had said that stipulating a reasonable threshold will make the tax system more efficient and acceptable. It had suggested that this threshold could continue until a transition is made to comprehensive VAT on goods and services, when the thresholds for the two could be standardised. The Govinda Rao panel was against selective exemptions as special interest groups would get active, forcing many litigations on the government. The panel was also of the view that by having separate regimes for goods and services will create distortions and argued for a regime that would integrate goods and services. The comprehensive service tax levy will require legislative backing as the provisions made in Service Tax Rules 1994 are seen to be inadequate. A tax enactment could minimise disputes by reducing the discretionary powers of the tax authorities.

Govt may fix Rs 10 lakh service tax threshold

Here's some news that'll cheer small businesses. The tax on services, which the finmin proposes to widen extensively, may come with a threshold. While the CBDT and

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