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Tax credits on cellphone likely
FM is likely to allow services providers to take credit on service tax payments against the mobile phone expenses incurred by them.
Finance Minister P Chidambaram is likely to allow services providers to take credit on service tax payments against the mobile phone expenses incurred by them.
Chidambaram may make an announcement in this regard in the general budget later this month as part of his efforts to streamline the service tax regime.
Highly-placed sources said that allowing the service providers to take credit on service tax payments against cell phone expenses would have two fold impact.
Firstly, this move will provide a major relief for the service providers who are already allowed to take credit on service against landline expenses.
Secondly, the cellular operators will get a major boost in terms of selling their own services to other services providers in other sectors.
Allowing tax credits on cell phone expenses was part of the move to allow services industry to provide quality real time services, said a Finance Ministry official.
It will also bring cell phone industry on par with fixed line service providers.
For instance, a courier company using landlines to provide its own services is currently allowed to take tax credit on such expenses. From now, the courier company would be allowed to take a similar tax credit against a large number of cell phones deployed by it, sources said.
This move is expected to give a major relief to tourism, hospitality, insurance and banking services industry, according to a Finance Ministry official.
Streamlining the services tax regime would lead to higher compliance thereby higher realisation in terms of revenue, argued official sources.
During the first ten months in the current fiscal, Finance Minister P. Chidambaram managed to garner Rs 16,205 crore through service tax registering a 68.1 per cent growth over last year's figures in corresponding months.
Chidambaram has taken credit for Rs 17,500 crore for service tax in the entire financial year as against Rs 14,150 crore actual collections through this levy in 2004-05.
Service tax collections constitute about five per cent of the total tax revenues projected for the current fiscal at Rs 3,70,015 crore.
Benefits Cellular operators will get a major boost in terms of selling their own services to other services providers The move will also bring cell phone industry on par with fixed line service providers It is expected to give a major relief to tourism, hospitality, insurance and banking services industry.
