The Lowdown On The Indian Service Tax Structure

by Vikash Dhanania Consultant

The Indian Finance Ministry has always faced the daunting task of tax collection from a massive portion of a population that comprises of more than 1 billion people. Well, all of them are not tax payers, but a vast majority of the ones who are eligible, doesn’t pay their taxes or file much lower amounts. Due to the lack of a well streamlined tax collection system, the brunt of low tax collection is often felt by the Finance Ministry who come up short miserably on the pre-estimated tax collection figures. It is a well known statistics that the proceeds from the Service Tax collections have been the fuelling factor to compensate for the budgetary deficits. In fact, by virtue of the indirect tax collections, the Finance Ministry has been able to compensate for the off-budget compliances.

Citing the importance of the indirect taxes, the Indian Government has looked into optimizing the tax revenues. In line with these procedures a number of changes have been roped in to the tax structures. Service tax rules, in particular has been given a makeover in recent times. In the budget speech for FY2012-2013, brought forth a number of amendments in the Service and excise tax structure. The Negative list of services has been given a trim with a number of new services coming into purview of service tax. Some services got respite from service tax as well. Despite a number of services being eliminated from the list of service tax, the numbers of service tax collection is healthy to say the least. The indirect tax collection has risen significantly in the recent times with the Finance Ministry coming down hard on the tax defaulters. Prosecutions and penalties have become more commonplace now with the tax officials unleashing a tight scrutiny over the defaulting persons.

The ACES website provides end to end solution for the tax payers to file in their service tax returns. With e-filing also becoming a preferred mean for the net savvy generation, tax revenues have been hitting all time highs in recent times. The augmented service tax payment has catalyzed the process of tax collection by the tax officials. It is to be noted that in their quest of augmenting tax collection and checking tax defaults, the Government has come up with a number of reformatory measures like Voluntary Compliance encouragement schemes. The initiative from the Finance Ministry aims at curbing the tax defaults while making room for realization of default tax amounts. By providing for immunity against penalties and prosecutions, the Finance Ministry is encouraging the tax defaulters to come clean with one lump sum payment.

The results of the provision are already showing with some states already experiencing a sharp rise in the indirect tax collection. Bihar for example has always held recognition for low tax collection figures. In the last quarter of the year, the indirect tax collection has shot up almost 26% in that part of the country.

Author Bio:
The author is Chartered accountant and also a practicing tax consultant. He pens down his insights on the latest news and updates on the Indian tax regime. To know more about the Service Tax Rules and the methods of Service Tax Payment, he recommends you to visit myservicetax.in.