Panel on service tax asked to submit report by Oct

NEW DELHI, JUNE 28: According to an official notification, the seven-member expert group on service tax, which will be headed by director ...

NEW DELHI, JUNE 28: According to an official notification, the seven-member expert group on service tax, which will be headed by director of the Institute of Social and Economic Change, Govinda Rao, would examine the existing structure of service tax and make recommendations on extending the tax base in the area of services and the timing thereof.

Under the terms of reference, the group would also suggest measures to make the existing procedure more effective, augment voluntary compliance and reduce compliance cost. It would also go into other related matters.

The expert group has been asked to submit its final report by December 1.

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Besides Rao, the other members of the committee are B C Rastogi, former chairman of the Central Board of Excise and Customs, D B Lal, former member of the Central Board of Direct Taxes, Ashok Wadhwa, tax consultant, Arvind Virmani, senior economic adviser in the finance ministry and Indira Raja Raman of the National Institute of Public Finance and Policy.

Sukumar Shankar, CBEC member, is the member secretary of the group which would be headquartered in the capital. The group may co-opt, with the concurrence of the government, other members who have experience and expertise as well as invite experts for discussions.

Services, it may be mentioned, is emerging as an important area of economic activity. In a bid to increase collection, the government wants to tap services sector which has started showing impressive growth and is poised to grow rapidly in the coming years.

The service tax, it might be recalled, was introduced in the fiscal 1994-95 and the collection was a modest Rs 407 crore. Thereafter the collection has continued to grow and during 1999-2000, service tax collection was Rs 2,000 crore. For the current year, the government is expecting to net Rs 2,200 crore as service tax.

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However, government has not be able to tax a lot of services because of resistance from the concerned groups and implementation bottlenecks. The committee is expected to draw a framework for expanding the base of the service tax.

Also the state governments have expressed their desire to impose service tax at state level. The issue was discussed at the recent meeting of the chief ministers with union finance minister Yashwant Sinha in the capital. Such an step would require a constitutional amendment. However, the issue whether states should be allowed to impose service tax or not will finally be decided by the empowered committee of the state finance ministers.

The report of the expert group will also have a bearing on the inspiration of the states which are keen to enhance their revenue by taxing the services.