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Service tax net may be widened

india Updated: Feb 05, 2007 21:04 IST
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With over 300 mergers and acquisitions (M&A) taking place in the last quarter and some more big-ticket M&A deals in the offing, the government is contemplating to bring legal professionals providing consultancy for such deals under the ambit of service tax.

According to officials in the finance ministry, those legal professionals working as solicitors, attorneys and lawyers in law firms providing services of drafting of contracts and advising M&As should be considered as service providers and are likely to be brought under the service tax net.

The rapidly growing outsourcing of legal services seems to be another reason behind including this group in the already existing list of 95 categories of professions in the service tax list.

Officials on the condition of anonymity said that diagnostic centres, medical clinics and even private hospitals are likely to be brought under the service tax net. If this happens, health-related services would become costly for the common man, say analysts.

Reportedly the government is planning to include commercial film and TV serial actors and directors among others in the service tax category in this year’s union budget.

Other professionals attached to the TV and film content production, including studio operators, make-up artists, costume designers, music directors, choreographers and art directors are also likely to be added to the list.

As per preliminary calculations, the government may collect up to Rs 400 crore per annum from this production process alone.

Analysts said that the production cost of films and serials would go up as the actors and others would be charging the extra pay from the producers. But this will be applicable for the established ones while the strugglers, with no bargaining power, will have to bear the brunt.

So far, these professionals have been paying 5 per cent professional tax deducted at source and income tax depending on the slab they are in. Once they are brought under the service tax net, their pay-out would go up by more than 7 per cent as service tax is charged at 12.24 per cent.

Email Lalatendu Mishra: lalatendu.mishra@hindustantimes.com

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