Financial Daily from THE HINDU group of publications
Friday, Aug 02, 2002
Money & Banking - Financial Policy
Industry & Economy - Taxation
Service tax net cast wider
NEW DELHI, Aug. 1
THE Finance Ministry has attempted to offset the revenue loss on account of the withdrawal of service tax on life insurance premium by bringing under the service tax net a host of fresh entities in the banking and financial sectors.
It has also decided to clamp the levy on auxiliary life insurance services agents, actuaries and surveyors besides the nine new services announced in the 2002-03 Budget. The levy will come into force from August 16.
Asset management companies, portfolio managers, merchant bankers and forex brokers are the new financial sector entities, which are liable to pay service tax. This has been done with the Finance Ministry broadbasing the definition of "banking and financial services".
Hitherto, only a few specified service providers in the banking and financial sector (including non-banking finance companies) were liable to pay service tax.
AMCs, portfolio managers, etc were not covered under the list of specified service providers. The Central Board of Excise and Customs has now made it clear that "all body corporates which were not covered in the earlier definition of banking and financial services will be liable to pay service tax". The new services on which the levy has been imposed include cargo handling, storage and warehousing, event management, rail travel agents, health club and fitness centres, beauty treatment service, fashion designers, cable operators and dry cleaning service, besides auxiliary insurance services.
According to CBEC, auxiliary insurance services will include services provided by insurance agents to the insurer as well as the policyholder, by actuaries to insurer or by any other intermediary such as surveyors and loss assessors. As regards insurance agents, the onus of paying service tax is on the insurance company that appoints such agents, CBEC has said.
In the case of cargo-handling service, any service provided in relation to agricultural produce or goods meant for cold storage have been exempt. Agricultural produce and cold storage are already excluded from the scope of the levy under the category of "storage and warehousing service".
For the first time, CBEC has also permitted credit of service tax paid on input service. The credit can be utilised for payment of service tax on output service, falling in the same category of service as that of input service.
CBEC has also amended service tax rules to allow a service receiver in India to pay tax in case the service provider is a non-resident or is from outside the country and does not have an office here. The interest rate on delayed payment of service tax has been fixed at 15 per cent.
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