Trade wants service tax exemption for SSIs

The Bengal National Chamber of Commerce & Industry (BNCCI) has requested the government to introduce a threshold limit for exemption in case of service tax payment for small and tiny service providers.

BNCCI said the threshold limit should be fixed at Rs 10 lakh of turnover per year. S N Nundy, president of BNCCI, said at a seminar on 'Service tax: Implications on industry and trade' here today, said the Finance Act, 2004 had 71 taxable items under service tax.

"The scope of service tax is such that it would cover the tiny sector and the smallest of small enterprises. In case of a manufacturing SSI unit, the unit concerned can claim exemption, but if it is in other category, it has to pay service tax even from zero turnover. This disparity should be looked into," he commented.

Sunipa Basu, chief commissioner central excise, said in response that the best way would be to tax all service providers be they small or tiny and provide the small and tiny ones incentive through a credit mechanism based on refunds.

"This was because existence of exemptions and incentives was hampering implementation of value added tax system that the government was planning to implement from April 1, 2005. Levying tax through VAT on everyone while providing credit to companies and units below a certain turnover could be the best solution," she explained.

Basu said that the new system was aiming at self-compliance and that assessment would be done by the department only on special occasions when a case of evasion or non-compliance was suspected.

Kamal Jyoti, commissioner of service tax, was also present at the meeting and said the government would settle with defaulters in case they wanted to clear up dues with interest.

He, however, said interest will have to be paid by entities in case of a default without scope for waiver.