Service tax to go up by 1% every year: NCAER
Economic think-tank NCAER has said that service tax will go up by one per cent per annum in the next four years, following the government's decision to introduce goods and services tax (GST) from April 1, 2010.
"The roadmap for service tax is clear. It will gradually go up and align with the highest CENVAT rate of 16 per cent and one can expect an average service tax rate increase of one per cent per annum," National Council of Applied Economic Research said in its monthly report.
The contribution of service tax to the exchequer would be consistent with its contribution to GDP once the scope of service tax is increased on all services and aligned with the highest CENVAT rate, it added.
The report welcomed the announcement made by the Finance Minister that India will move towards a national level GST from April 1, 2010.
"This is important, as in our view, this gives a policy direction for indirect taxes," it felt.
On the implications of the budget for growth, the report said that with the lowering of excise duties and the reduction in customs duty on non-agricultural products, the consumption growth would not come down.
The report also held that prices of manufactured products would remain stable.
"Although, a countervailing duty (CVD) of four per cent is levied on virtually all imports, the full crediting of this duty will be allowed to manufacturers of excisable goods. This will ensure that prices of manufactured products remain stable," the report pointed out.