Service tax net set to widen

Get ready to shell out more for your movie tickets, cricket matches or visits to amusement parks as all recreation services will come under service tax later this year. Private schools, hospital fees and college fees (Rs 1,000 and more for the latter) will also come under the ambit of this indirect tax net.

Service tax is currently levied at the rate of 12.36 per cent on the billed amount. It is also likely that the tax rate would be hiked in the years to come, with the introduction of the Goods and Service Tax in 2010.

The Empowered Committee of State Finance Ministers, which met here today, cleared the proposal. Announcing this here today, West Bengal finance minister and committee chairman Asim Dasgupta said that individual persons like artists and sports persons would not be taxed. However, the institution where the event takes place would come under the service tax net.

Dasgupta met Finance Minister P Chidambaram to convey the decisions of the committee. A Bill is likely to be introduced in the Parliament for levy of service tax on the new items identified by the Committee. "The service tax net will be extended from this year itself," Dasgupta said, but did not mention a specific date.

"Education and health services for common people will not be taxed. We cannot tell you details as state government assembly sessions are on at the moment. We have chosen the items in a manner that would not affect the common people at all," Dasgupta added. The central government has agreed to collect service tax on the selected items for 2007-08 on behalf of the states and transfer the proceeds to them.

The committee also discussed issues related to value added tax (VAT) and the progress made on the proposed introduction of the Goods and Service Tax by 2010. VAT revenues have maintained a high growth - 24.6 per cent growth in the first three months of 2007-08.