While Finance Minister P Chidambaram is targeting a 25 per cent increase in overall tax collections, the highest buoyancy is expected in the areas of service tax (70 per cent) and corporate tax (40 per cent). To achieve this, the minister has increased the service tax rate to 10 per cent from the existing 8 per cent.
The tax will now be levied even on the fee charged by banks for providing cheque book facilities, thus affecting customers of most private sector banks.
This is one of the 13 services that have been added to the existing list of 58 taxable services.
Chidambaram has also moved towards an integrated goods and services tax to allow taxpayers to claim credit on either service taxes or excise duties paid by them.
According to some tax experts, however, the integration can lead to a huge loss of revenue, which is why the minister has raised the rate to 10 per cent.
After a lull of almost seven years, the government once again plans to levy service tax on the transport sector, but Chidambaram made it very clear that the tax would not be levied on truck owners/operators.
Instead, it would be levied on large transport booking agents, who usually make all bookings and then hire truckers to transport the goods. The big divide between truckers and transporters has made the ministry confident of making a good haul from this Rs 160,000 crore (Rs 1,600 billion) industry.
Other services that will now be taxable are business exhibition services, airport services, opinion poll services, brokering of forward contracts, intellectual property rights other than copyrights, pandal and shamiana contract services, outdoor catering, commercial/industrial construction services and independent TV/radio programme production. Tax is to be paid on the risk-premium part of insurance premia, though not on the savings part of the premium.
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