According to sources in the revenue department, although there were practical difficulties in introducing compulsory registration of service providers, there was a possibility of introducing the scheme on a selective basis in the next budget.

The issue of service tax was discussed at a high-level meeting between the finance ministry officials and industry representatives recently.

Sources said the idea of compulsory registration was mooted by the industry and finance ministry was in favour of the scheme as it would help in reducing tax evasion. The industry is of the view that registration of service providers should be made compulsory irrespective of the quantum of turnover of the service organisation. It was suggested that all commercial establishment registered for economic activity should be asked to apply for registration under the service tax. It was further suggested the small service providers upto a specified threshold limit should be exempted from payment of tax. However, registration will ensure that the exempted units would be covered under the service tax as and when they cross the threshold limit.

Secondly, the industry has suggested that small organisations having a turnover of Rs 1 lakh to Rs 5 lakh or any other amount specified by the finance ministry, be allowed to pay taxes at specified rates based on self declaration without any requirement of assessment by the service tax officials. This step was expected to remove hardship and encourage voluntary compliance by small service providers. Services is emerging as an important area of economic activity and also assumed significance as far as taxation is concerned.