New system of Taxation of SErvice will come into effect from 01/07/2012

NEW DELHI, JUNE 04, 2012: WHILE addressing the distinguished gathering of CBEC Chief Commissioners and DGs, the Union Finance Minister, Mr Pranab Mukherjee, patted the back of the officers for having collected Rs 3.92 lakh crore nothwithstanding slowdown in the economy and a major cut in the duty rates of petro products. He said the new target of about Rs 5 lakh crore for the current fiscal has been fixed keeping in mind the increase in central excise and service tax rate from 10 to 12 per cent and the observed buoyancy in service tax collections.

 Legal Corner Icon<http://www.taxindiaonline.com/RC2/image/stories/cc_config.jpg> Mr Mukherjee underlined that the challenges before the department today are multi-faceted. He said that at a general level, there is an urgent need to reverse the declining trend in tax- GDP ratio by augmenting tax collections. This ratio was nearly 12 per cent in 2007-08 but has dropped to around 10.5 per cent in 2011-12. There is scope for improving tax administration by leveraging technology and facilitating a congenial public interface, where required, through appropriate training and capacity building, he added.

The Minister said that the ever increasing demands from trade and industry for faster clearance of import-export cargo, prompt payment of refunds and drawback claims, timely resolution of difficulties faced by the taxpayers etc. has to be balanced with the need for improved tax revenue mobilization. The important task before the CBEC is to ensure timely collection of all legitimate tax dues, without, of course, unduly burdening the assessee. You must sharpen your audit skills and conduct intelligent scrutiny of assessees' records to bring to the kitty any tax that might have escaped assessment and to detect frauds which are often intelligently planned and meticulously executed, he added.

The FM expressed his happiness particularly with the buoyancy in Service Tax collection in 2011-12 which, at Rs. 97,389 crore, far exceeded the Budget Estimate of Rs.82,000 crore. He said taht the rate of Service Tax has been enhanced to 12 per cent in the Union Budget, 2012 in order to gradually move towards a unified GST regime. A ‘Negative List' approach for taxation of services is being introduced in the current fiscal. Under the new approach, all services except those in the ‘Negative List' or otherwise exempted, would come into the tax net. The new system will come into effect from 1st July, 2012. The new comprehensive approach to taxation of services is a shining piece of tax reform, preparatory to the introduction of GST. In a nutshell, the comprehensive approach to taxation of services implies larger tax base with limited number of exemptions, he added.