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Service tax net widened

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February 28, 2007 15:08 IST

Finance Minister P Chidambaram has proposed to raise the Service Tax exemption limit for small service providers from Rs 4,00,000 to Rs 8,00,000.

While presenting the General Budget 2007-08 in the Lok Sabha on Wednesday, the minister said that the revenue loss on this will be Rs 800 crore and stated that he is happy to give away this sum in the interest of small service providers and the consumers.

Chidambaram also proposed to extend the service tax to:

  • Services outsourced for mining of mineral, oil or gas;
  • Renting of immovable property for use in commerce or business;
  • Development and supply of content for use in telecom and advertising purposes;
  • Asset management services provided by individuals; and design services.
  • The finance minister has also proposed to levy Service Tax on services involved in the execution of a works contract.

Chidambaram proposed an optional composition scheme under which service tax will be levied at only 2 per cent of the total value of the works contract.

Service tax is exempted on services provided by Resident Welfare Associations to their members who contribute Rs 3,000 or less per month for services rendered.

No service tax on all services provided by technology business incubators. Their incubates whose annual business turnover does not exceed Rs 50 lakh will be exempted from service tax for the first three years.

The finance minister also proposed to exempt clinical trial of new drugs from service tax.