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Letters to the editor

Service tax blues

Published: January 7, 2016 12:34 AM

Service tax blues

Budget 2016 should consider moving to a system where the service recipient (payee) will mandatorily deposit the service tax with the government and the service provider is left only with the obligation of filing returns and collating details of tax deposited at source. The present 26AS system adopted for income tax deducted at the source can be used for this purpose. The recovery and deposit by the payee shall be fixed in such a way that the correct tax is fully recovered at source, irrespective of whether the service provider has made the contract all inclusive or has charged the service tax extra. Once this is put in place, the concept of reverse charge can be disbanded. The service provider will also be able to take credit for all input taxes. The only downside would be that the service provider would need to apply for refund of input taxes in every instance. There should refund of all input taxes within 15 days of the filing of e-returns and such refunds should be outside the scope of any intervention by tax collectors. Any question of excess or shortage, eligibility or otherwise shall be settled only during the assessment. This may automate compliance, eliminate unintended mistakes in some cases, where correct taxes are not paid and obviate the interface between tax-payer and the government.

Ranganath Kidambi, Bangalore

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