Ratio of service tax to GDP has to go up: CBEC chairman

Bangalore, Aug 30 | Updated: Sep 1 2008, 04:56am hrs
The government hopes to increase the contribution of service tax to the countrys GDP. The figure currently stands at a low of 1.1%.

The contribution of the service sector in the GDP is 56% but the share of the service tax in the GDP is just 1.1%, the chairman of the Central Board of Excise and Customs (CBEC), P C Jha, said in an interaction meeting organised by the Bangalore Chamber of Industry and Commerce.

So, its quite low. In the future this ratio has to go up. The service sector is the one from which the government expects to get more revenue in future, he said.

Jha said the service tax revenue is growing at a rapid pace. In 1994, service tax was imposed on three services and the rate of duty then was 5%, with service tax revenue at Rs 410 crore from 3,900 service taxpayers. Now, 106 services come under tax and the rate of tax has gone up to 12.36%. The number of service tax players in the country has now gone up to 5.5 lakh and the service tax collection in 2007-08 was Rs 51,113 crore.

For the current financial year (2008-09), the target for the collection of service tax is Rs 64,460 crore, he said, adding that the department expects it to go up. Speaking on indirect tax (customs, central excise and service tax) collection, Jha expressed hope that despite the post-Budget reductions in duties on diesel and crude, the target of Rs 3,20,000 crore (14.1% higher than last years collection) would be met in this fiscal. But in spite of that we are hopeful that with additional revenue on service tax, (and) some policy factors which have come, the target of Rs 3,20,000 crore will be...achieved, he said.

The contribution of indirect taxes in the total tax revenue was 47.5% in 2007-08 (coming down from 58%in 2004-05) and it is projected to decline to 46.5% in the current financial year.

Speaking on large taxpayer units (LTUs), Jha said that the units are now functional in Bangalore, Chennai, Mumbai and Delhi, while the fifth one will be opened in Kolkata by the year-end. Following this, the department would look at the possibility of opening LTUs in other places, he added.