Aimed at giving some relief to the retail sector, the high-level group on service sector has recommended that service tax levied on outsourced manpower services be confined to only the fee component and should not include salaries.
The retail industry is large user of outsourced manpower services. The service providers involved in providing manpower services to the retail industry have to pay service tax but there is the problem in assessing the value of the service transaction.
The service is valued not only on the basis of the fee of the service provider but includes the salary paid to the employees.
The group which submitted its report on Wednesday to Planning Commission Deputy Chairman Montek Singh Ahluwalia said that the method of valuation of service of the service provider “unfairly increased the tax burden on the retail industry”.
On the more than 50 year old Shops&Establishment Act which governs the retail trade in most of the states, the report said a tripartite committee should be set up by the Central Government to revise the provision in the legislation taking into account present realities in terms of workplace and use of technologies.
It has also recommended that a committee review the performance of the Employees State Insurance Scheme and suggest reforms and let employers and employees subscribe to alternative health insurance programmes as there a number of private sector health insurance companies in the market at present. For smooth movement of goods, every million plus city should establish transport nagars outside the municipal limits and integrated logistical hubs should be developed at strategic points.