Tax on bank services opposed

Trade unions and bank employees federations have opposed the imposition of the 10 per cent service tax on banking services like issue of pay orders, demand drafts and cheques, saying it would cause a loss of revenue to public sector banks by discouraging the banking habit among people.

Supporting the unions, the CPI today said the tax would encourage parallel banking and increase the circulation of black money.

"The tax will discourage the people from visiting banks. We are opposed to the tax and will convey it to the government," said D Raja, CPI secretary.

The All-India Trade Unions Congress (Aituc), the CPI's trade union wing, said the tax was unfair since it constituted an additional burden on the people. The All-India Bank Employees Association has also decided to bring up their opposition to the service tax during the stir.

"The tax will discourage people from using banking services and hit national savings," said Ramanand, joint secretary of the All-India Bank Employees Association.

The government had notified an increase in the service tax to 10 per cent in addition to the 2 per cent education cess on September 11, bringing 8 new services under the service tax net.

Services like lending, issue of money orders, demand drafts, cheques, letters of credit , bill of exchange, bank guarantees and over draft facility bill discounting facility, safe deposit lockers, safe vaults and the operation of bank accounts will be subjected to the service tax, bill discounting facility, safe deposit lockers, safe vaults and the operation of bank accounts are subject to the service tax.