Lawyers, doctors not in loop, services dearer

Be prepared to shell out more to improve your image. He netted beauty parlours with the service tax levy in Budget 2005 and in Budget 2006, ...

Be prepared to shell out more to improve your image. He netted beauty parlours with the service tax levy in Budget 2005 and in Budget 2006, Finance Minister P Chidambaram has roped in public relations PR services.

The service tax levy has also been hiked to 12 per cent from 10 per cent today it was 8 per cent in 2004, with an eye to mop up Rs 34,500 crore by 2006-07 from the levy. By 2010, this service tax is to be taken over by a uniform Goods and Services Tax GST at 12 per cent.

But a host of expected entrants to the list8212; lawyers and doctors, in particular8212; were not announced, nor was a roadmaop for increasing the net.

The revised estimates for service tax proceeds for 2005-06 have been placed at Rs 23,000 crore instead of Rs 17,500 earlier estimated. In the absence of a negative list of services that will not fall into the service tax net, Budget 2006 has roped in Internet telephony, some IT-related services, cruise trips and corporate sponsorship not of sports events.

Sale of space or time for advertisements not for print media, a share transfer agent8217;s services, money transfers, management consultancy services and computerised data processing are also now classified as services which will be taxed at 12 per cent.

The inclusion of recovery agents, international air travel excluding economy class passengers and ship management services already have the industry up in arms. The increase in service tax and broadening of the net to cover some previously excluded IT-related services will not only raise costs, but will act as a deterrent to outsourcing work to SMEs,8217;8217; IT industry association Nasscom said in a statement.

Around 30 per cent of service tax collections come from the telecom sector, which had demanded 8216;8216;relief8217;8217; from overall taxes and levies in Budget 2006. The telecom industry associations were not amused after Tuesday8217;s announcements actually hiked the service tax levy by two per cent.

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8216;8216;The increase in service tax levy will enhance tariffs in the telecom industry,8217;8217; said AUSPI secretary general S.C. Khanna. It8217;s also expected to have an impact on the costs of services availed by the IT industry, added V. Sunderajan, CFO, Aztec Software.

There were some relaxations on the service tax levy too, with the FM removing interest and installments of principal amounts from the calculation of service tax on components of payments, including interest by the leasing and hire purchase industry.