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Nothing?s for free, not even fun

In his quest to raise revenues, FM has decided to plug into the ever burgeoning services sector which is now contributing 54% to the GDP.

india Updated: Mar 01, 2006 13:24 IST

Get ready to pay more for services.

In his quest to raise revenues, the Finance Minister has decided to plug into the ever burgeoning services sector which is now contributing 54 per cent to the GDP.

A clutch of services have been brought into the tax net while enhancing the service tax rate to 12 per cent from the prevailing 10 per cent. In effect the service tax rate, after taking into consideration the 2 per cent education cess, would be 12.24 per cent.

Finance Minister P. Chidambaram proposes to rake in Rs 10500 crore addi tionally through this tax. This is expected to make a host of services expensive for the ordinary consumer.

For instance, vendors who have set up automatic teller machines (ATMs) with banks and financial institutions will have to pay service tax at 12.24 per cent. Similarly, services provided to the consumers on outstanding balances by credit card and debit card holders would be liable for service tax.

Using the internet, internet telephone service like broadband, vacation or travel by cruise ships or travelling abroad on business class tickets will also attract service tax.

The other services that have been brought under the tax net include registrar to public issues, share transfer agents, recovery agents employed by banks and financial institutions, advertisements made on radio, television and internet sites, sponsorship services provided by public event firms.

Container services provided by private companies transporting goods on railways, auctioning, business support, public relations firms and individuals, ship management services have also been covered under service tax net.

Further, the scope of levying service tax on 58 services already covered under the tax net has been widened.

By virtue of extending the scope of service tax, transfer of money either through draft, money order, postal order or online money transfers by individuals would also be liable to tax.

Bankers providing services for a public issue, management consultancy services provided by individuals, general insurance and life insurance service provided by the likes of LIC, GIC and a host of private insurers and re-insurers has been brought under service tax net.

Insurance companies collecting premia outside, business auxiliary service providers, consulting engineers, clinical testing services for drugs and formulations, repairs done by individuals on two wheelers and four wheelers have been covered by the service tax Professional help to file returns The Union Budget 2006-07 has proposed to create a new set of financial intermediaries — Tax Return Preparers (TRP) — who will be authorised to assist the tax payer to furnish returns of income.

The government will come out with detailed guidelines on the modality of how the TRP will assist the tax payers and also affix his signature over the return. A scheme giving details of the education, and other qualifications for TRP will be launched. Experts feel this new breed will replace the current lot of chartered accountants who assist in filing returns.

First Published: Mar 01, 2006 13:24 IST