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Service tax exemption limit may be doubled

india Updated: Feb 04, 2007 03:41 IST
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Good news for housing societies may be just round the corner. Around 90 per cent of them will move out of the service tax bracket if a suggestion to increase the exemption limit is accepted in the coming Budget.

The service tax department has recommended that the exemption limit be raised from the current Rs 4 lakh to Rs 8 lakh. This means any service provider who has an annual turnover of less than Rs 8 lakh will not have to pay service tax if the recommendation is accepted.

Also, 10 to 12 new services are likely to be added to the taxable list in the Budget.

Sources in the service tax department said among the services being considered were those rendered by doctors, lawyers, hotels and services required in filmmaking.

Officers in the service tax department said while they were not as sure of the inclusion of the new services in the list, they  were pretty confident the increase in the exemption limit would be made.

Advocate Vinod Sampat, who is also president of the Cooperative Societies Residents and Users Association, said that if the exemption limit recommendation were to be accepted then 90 per cent of the societies would be out of the service-tax bracket.

“Only such societies which have a good source of income from transfer of flats, subletting of premises, or from major repairs or redevelopment will be liable to pay service tax,” Sampat said.

The bringing of housing societies under the service-tax net in July 2005 was a highly unpopular announcement and most societies simply refused to pay. Till date, only around 30 societies have registered themselves with the department. There are about 15,000 registered housing societies in the city, of which 40 per cent to 50 per cent fall under the service tax bracket.

The service tax department has so far only got about Rs 5 lakh from the housing societies. The societies have contended that they are not profit-making bodies and are only utilising their own money on themselves.

Service tax department sources said they were most hopeful of the recommendation getting accepted.

“The recommendation has been made as we spend a lot of time running after the smaller service providers because the exemption limit is just Rs 4 lakh,” said a service tax department officer, who spoke on condition of anonymity. “As a result, we can not focus on big service providers from whom the department can recover huge tax: the small service providers give us tax in few thousands whereas the big ones give in lakhs and even crores. It makes more sense to concentrate on them.”

email Manish Pachouly: manish .pachouly@hindustantimes.com

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