The Hindu Business Line : Service tax collection target may be hiked

THE more than expected buoyancy on the industrial growth front in the recent months may prompt the Finance Ministry to raise the bar on service tax collections for the current fiscal. The revenue department is already contemplating increase in budgetary targets for direct taxes and customs collections for the current fiscal.

Informed sources said that a proposal for hiking the service tax collection target by Rs 1,000 crore for the current fiscal is being considered by the revenue department. The Budget estimate for service tax for 2004-05 is Rs 14,150 crore as against Rs 8,300 crore in 2003-04. Revenue department officials are, however, apprehensive about the possibility of achieving the proposed enhanced target (Rs 15,150 crore) even though the number of taxable services under the service tax net has been widened and the rate of service tax has been raised to 10.2 per cent (including education cess of 2 per cent).

As many as 13 new services (including the goods transport agency) were brought under the service tax net in July this year, when the budget for 2004-05 was announced.

One of the reasons for the apprehension is that the revised rate would be applicable from the date the Finance Act 2004 came into force, thereby leaving only nine months for collections to be done at the revised rate. Further, there has also been delay in imposing service tax on taxable services provided by goods transport agency. The service tax on goods transport agency would come into effect only on January 1, 2005.

Of the Budget estimate of Rs 14,150 crore, the Government had estimated a sum of Rs 3,990 crore to be contributed by the new services (13 new services). Service tax collections of the Centre during April-September 2004 stood at Rs 4,799 crore as against Rs 2, 814 crore in the same period last year.