Govt aims Rs 1,06,000 crore from service tax in four years

FRBM Act mandates government to cut fiscal deficit by at least 0.3 per cent of GDP and revenue deficit by 0.5 per cent annually. In order to attain this target, the government has to raise its revenues significantly, mainly from service tax.

NIPFP director Govinda Rao asked the centre to bring all services, barring a few, under the tax net with a threshold limit of Rs 10 lakh in turnover.

The government is unable to extend the list of services under taxation mainly due to administrative hassles in classifying all the service categories. This practical problem could be overcome by announcing a negative list of services and bringing all others into the tax net, Rao said.

‘‘It is our ultimate goal to move towards a single goods & services tax,’’ said R. Sekar, a joint secretary in the finance ministry. In his budget for 2004-05, Finance Minister P. Chidambaram had made a move towards this by allowing excise duties to be rebateable against service tax and vice-versa. The move towards GST was also recommended by Kelkar task force on tax reforms. It also proposed integration of GST with the state-level VAT to create a national VAT.

Service tax, which had fetched a meagre Rs 406 crore in the first year of its inception in 1994, has shown the fastest growth and is budgeted at Rs 17,500 crore for 2005-06. The share of service tax to GDP has also increased from 0.04 per cent to 0.5 per cent. Importance of services, which contribute 54 per cent of GDP, has not increased merely for revenue purposes but also for its export potential and attracting FDI, Sekar said. ‘‘India is now number one in terms of service exports. FDI in services sector has been increasing much faster than that in goods,’’ he said.

More tax exemption on gifts from trusts

NEW DELHI: The government proposes to double the tax exemption limit to Rs 50,000 on gifts or income received from charitable trusts or local bodies. The taxation laws (amendment) Bill, however, makes it clear that gifts or funds received from charitable trusts and aggregating more than Rs 50,000 will have to be included in the total income and will be taxable. At present, the tax exemption limits on gifts or funds received from charitable trusts or local authorities is Rs 25,000 as per Section 56 of the Income Tax Act. The amendments will be effective from this fiscal, the Bill said. — ENS