As the D-day is comming closer, there is lot of speculation about what the so called ‘Finance Budget’ has in store for everyone. On one hand there have been requests from every sector to either cut the duties or taxes or to exempt them from certain levies or not to bring them under the purview of a particular tax and on the other hand, the Finance Ministry might be burning midnight oils to try and increase their revenue by bringing more people or sservices or products under the tax ambit.

To cite few examples, jewellers approached the Finance Ministry on news that they might be brought under the service tax purview.

Then in another instance, the indian music industry to give a dose of ‘steroids’ to the music industry that has been reeling in losses due to rampant piracy, submitted to Government to make imports of pre-recorded audio compact disc (CDs) or video compact discs or digital versatile disc duty-free similar to the IT sector.

In one more incident, Mumbai Textiles Merchants’ Mahajan sought that VAT should not be imposed on fabrics and additional excise duty on fabrics should continue. Textile fabrics are currently outside the purview of sales tax and VAT.

In a pre-Budget memorandum, Mr. Surendra T. Savai, President, Mumbai Textiles Merchants’ Mahajan, said that excise duty on man-made fibers should be reduced to 8 per cent from 16 per cent. On top of that, Customs duty on man-made fibers was asked to be removed. Too much of an ‘ask’ isnt it???

And the biggest of all..the much infamous ‘FBT and Cash withdrawal tax’ is also inviting opposition from every sector and there is tremendous pressure on the FM to withdraw these two taxes.

And amidst all these opposition the Finance Ministry is working very hard on means to increase its revenue collection. It is setting up norms to tighten the systems so as to plug to plug misuse. Finance ministry reckons that there is considerable scope for increasing the revenues from existing services rather than from new services to be brought under the net this fiscal.

Service tax has been a very lucrative avenue for the Goverment to rake more and more moolaahhh!! As a result, it seems Goverment is concentrating on this trump card of its little too much. Now, The Government says that the construction companies, heavy engineering majors and other services providers that undertake turnkey projects will not be able to escape the service tax liability any longer. The finance ministry is set to arm itself with powers to make regulations for charging service tax on works contracts in the finance bill ’06.

considering the huge and voluminous revenue implications, the FM is keen that all loopholes be plugged and a clear-cut guidance for charging service tax be laid down for works contracts.

What we think is that, the goverment should judiciously and logically decide on what taxes to impose and what to exempt keeping in mind various factors like the interest of the people, the growth of the industry, the revenue generation to the government, economy as a whole etc. Any new tax being imposed should not work towards the detrimental of the industry or the economy or the people at large.

Popularity: 1% [?]