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Service
Tax
178. The service sector contributes nearly 60 per cent of the GDP.
The service tax to GDP ratio however, is only around 1 per cent.
This sector thus, has significant potential to augment revenue.
179. To bridge this gap, I had the option to raise the rate of service
tax to 12 per cent as it was before I introduced the third stimulus
package. I am not resorting to this option to maintain the growth
momentum and also to bring about a convergence in the rates of tax
on goods and services. I, therefore, propose to retain the rate
of tax on services at 10 per cent to pave the way forward for GST.
180. I had another option - to bring all services under service
tax. I am not opting for this either at this stage. I propose, however,
to bring certain services, hitherto untaxed, within the purview
of the service tax levy. These are being notified separately.
181. I am also proposing certain legislative changes to plug revenue
leakages, to remove distortions and to clarify certain doubts that
have arisen over a period of time. I do not want to waste the precious
time of the House elaborating the details, as they are available
in the Finance Bill and other Budget documents.
182. Export of services, especially in the area of Information Technology
and Business Process Outsourcing, generates substantial employment
and brings in foreign exchange. I propose to ease the process of
refund of accumulated credit to exporters of services by making
necessary changes in the definition of export of services and procedures.
183. Accredited news agencies which provide news feed online attract
service tax. Acknowledging the yeoman services of such news agencies
in disseminating news, I propose to exempt such news agencies that
meet certain criteria, from service tax.
184. My proposals relating to service tax are estimated to result
in a net revenue gain of Rs.3,000 crore for the year.
185. Copies of notifications giving effect to the changes in customs,
central excise and service tax will be laid on the Table of the
House in due course.
186. My proposals on Direct Taxes are estimated to result in a revenue
loss of Rs.26,000 crore for the year. Proposals relating to Indirect
Taxes are estimated to result in a net revenue gain of Rs.46,500
crore for the year. Taking into account the concessions being given
in my tax proposals and measures taken to mobilise additional resources,
the net revenue gain is estimated to be Rs.20,500 crore for the
year.
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