Pvt hospital, boarding school to cost more

The next time you go to an expensive private hospital or a private nursing home, be ready to pay a 10 per cent service charge plus 2 per cen...

The next time you go to an expensive private hospital or a private nursing home, be ready to pay a 10 per cent service charge plus 2 per cent cess on your bill. Because Finance Minister P Chidambaram is likely to tax these services this Budget.

Even the Black Label or Chivas Regal whiskies and perfumes that you pick from Duty Free shops could be levied service tax, starting this April. Also on the service tax list are upper-crust pre-nursery and kindergarten schools in big cities.

The new list being drawn by the Finance Ministry will include nearly 30 new services, taking total services in the tax net to 100. This year, the target for service tax collections was fixed at Rs 14,170 crore but next year the FM may want to push this target to Rs 20,000 crore as the services sector is expected to be the next big focus area for the government.

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The FM is unlikely to hike the rate from the current 10 per cent level along with the 2 per cent education cess levied on all taxes since he had raised service tax rate from 8 to 10 per cent in his last Budget in July last year.

	In service tax net soon

			• Pvt hospitals, nursing homes • Duty Free shops • Pre-nursery, KG schools • Elite boarding schools • Pipeline services • Construction & allied services like plumbers, electricians in housing societies

There are also plans to tax expensive hill-station boarding schools. The Finance Ministry may specify categories of annual fees being charged in a school to determine those that will fall in the tax net.

Processing fee or legal fee charged by banks on various loans given to customers could also have service tax slapped on them. The Finance Bill describes 248 banking services of which some common ones like chequebook sale, credit cards, draft-making services currently fall in the service tax bracket. This segment will be expanded further.

A service tax on pipeline services—crude, petro and gas products— is also on the anvil. The justification for this is that transport companies already pay tax on these products carried by tankers, so 50 per cent of these products transported through pipelines should also be included in the tax net. Most of these services are provided by PSU oil companies and the Finance Ministry could target a new way to tax them. One big question remains: Will doctors and lawyers be included in the service tax net? They are the two biggest constituents of the service industry.