Vital services should be excluded from the net of taxes, writes T N Pandey
The finance minister in his budget speech for the year 2000-2001 announced about the setting up of an expert group to go into all aspects of service tax matter in the light of the experience gained so far with a view to widen the tax net and simplify the procedure regarding levy and collection. A committee has since been constituted and is examining the issues connected with this tax.
Suggestions to make service tax more efficient and revenue yielding are:
*It is time to have a separate act concerning service tax out of the Finance Act, 1994 and other Finance Acts containing provisions relating to this tax. A self contained code is needed which should contain the legal provisions, rules, forms and procedures.
*The provisions of this act need to be harmonised with other acts that relate to services namely Chartered Accountants Act, Costs and Works Accountants Act, Securities Contract Regulation Act, Motor Vehicles Act, Telegraph Act, Customs Act, Central Excise Act etc. Harmonisation of the Service Tax Act with these enactments is necessary for smooth implementation of the act.
*Though tax on services is providing good revenue to the government since its introduction, it has to be appreciated that such a tax has a cascading effect in a situation where central and state governments are imposing various types of taxes to augment their revenue. The person ultimately to suffer is the common man whose capacity to bear taxes is limited. Hence services which are vital for day-to-day living may have to be excluded from the net of this tax.
*Further, a number of service providers are not organised and well-educated (example like Mandap keepers, mechanised slaughter houses, etc). Hence to collect taxes from them, the law, rules and procedures should be simple.
*The definition of the services that are proposed to be brought within the purview of this law should have no ambiguity. This would entail efficiency. The attempt should be to ensure that circulars are not required to be issued to clarify the concepts as have been issued concerning levy of service tax on telephone and pager services, international roaming facility etc.
*To avoid smaller service providers coming within the purview of this tax, it may be useful to provide threshold limit beyond which only the liability to pay tax should arise. This would avoid infructuous work at the assessing officers levels as also harassment to smaller assessees.
*Section 71 of the act dealing with regular assessment entitles the central excise officer to ask an assessee to produce books of accounts, documents etc. and this process can be repeated a number of times in all cases. To avoid unnecessary inconvenience in this regard, a system of summary disposal of cases, as under the I-T Act can be introduced for the service tax also and only 2 to 3 per cent returns may be scrutinised. Heavy penalties can be prescribed for those who file false or incorrect returns.
*Under Rule 7(3), the central excise officer is required to complete the assessment memorandum and send a copy of the return assessed to the assessee. No time limits have been fixed for the completion of assessment memorandum and for sending a copy of the same to the assessee. Time limits need to be provided for such matters.
*The present provisions do not entitle an assessee to file revised returns if he discover any errors or missions in these as is available under the I-T Act within the prescribed time. Such facility needs to be provided for service tax returns also. To discourage the tendency of misuse of this facility, a lump sum say Rs 1,000 can be prescribed to be paid before a person becomes entitled to file a revised return.
*The Service Tax (Amendment) Rules, 1999 w.e.f. 28.2.1999 has inserted a new provisio providing that a person who is a non-resident or is from outside India, does not have any office in India, and is liable to pay service tax, may not make an application for registration if such person pays the service tax on taxable services, rendered by him, under Rule 6.
*Under the present law if any refund is due to the assessee, he must apply for the same under section 11B of the Central Excise Act. The existing procedure under section 11B is quite cumbersome and time consuming . What is needed is that a provision must be introduced in the Service Tax Law itself for giving suo motu refund.
There are a number of other issues too. Since service tax has come to stay in the country it is necessary to achieve consolidation in the form of a complete code for this tax which would bring stability and certainty. It would be helpful if the committee
