The Centre is expected to increase the service tax rates from 5 per cent to 8 per cent in the Budget for 2003-04, alongside stiffer audit norms and penalties for not filing tax returns.
The rise will bring the service tax regime closer to the central value-added tax on goods at 16 per cent. According to S Madhavan, adviser to the government on indirect taxes and partner of PricewaterhouseCoopers, the service tax regime will also be strengthened by the introduction of stiffer norms on filing returns and a general toning up of the tax administration.
The Centre had targeted a service tax collection of Rs 6,026 crore in the Budget for 2002-03, up from Rs 3,600 crore the year before. Actual collection, however, was only Rs 4,200 crore till January.
While 10 new services were included in the taxable list this fiscal, none, including promising industries like rail and air cargo agents, storage and warehousing services and cable operators, yielded significant tax revenue.
The ministry, had, however modified the tax on insurance to exclude life insurance, which, officials said, brought estimates down at least Rs 1,200 crore. The higher rates will, naturally, be applicable only to services that remain under the Centre
