The central government expects a sharp rise in revenue collection on account of the five per cent service tax on the courier and advertising companies in the coming financial year. While the tax paid by the courier industry is slated to increase 2.8 times from Rs 25 crore in 1996-97 to Rs 70 crore in 1997-98, the tax paid by the advertising industry will swell nearly 2.6 times to Rs 62 crore.
However, the proposals of the finance minister seem relatively optimistic against the backdrop of the current realisations. In the current financial year, tax revenue from the courier industry was only marginally higher by Rs 2 crore, as against the 1996-97 budget estimates of Rs 23 crore.
On the other hand, tax collections from the advertising industry was disappointing, with actual realisation being only Rs 24 crore as against the projected Rs 45 crore.
The finance minister has deliberately adopted the strategy to tax the services sector as it contributes nearly 40 per cent to the GDP.
The total tax paid by the services sector as a whole is expected to go up over two times from Rs 970 core in 1996-97 to Rs 2,150 crore in 1997-98.
Of this amount, Rs 900 crore is expected to be the revenue generated from the proposal to extend the service tax to cover a number of segments like - transport, consultants, custom house, C&F agents etc.
At the same time, the tax revenue from telephones, insurance, advertising, courier is slated to increase by Rs 280 crore.
The finance ministers projections must be based on expectations of higher growth in the services sector.
However, the recent trends have been to the contrary.
As per the Economic Survey for 1996-97, the average annual growth of the services sector during the Eighth Plan is 7.3 per cent. While the quick estimates for 1995-96 shows that this sector grew at 8.8 per cent, the advance estimates for 1996-97 shows that the sector grew by only 7.4 per cent.
