Senior finance ministry officials told The Financial Express that with customs and excise duty realisation in the current financial year showing no signs of improvement, the ministry had decided to extract additional revenue from service tax.
They added that Central Board of Excise and Customs (CBEC) would soon initiate audit on telecom, insurance and stock broking entities to step up revenue collection. The notification in this regard will be issued next week, they added.
Sources said the audit on telecom, insurance, and stock broking entities was expected to arrest leakages and strengthen tax administration in the service sector.
The government had extended the ambit of service tax to 15 new areas in the current budget and pegged the target for service tax collection at Rs 3,600 crore. Revenue department officials feel that the figure could easily reach the Rs 5,000-crore mark with tightening of the administration.
Sources said the CBEC has decided to give powers to its officials to carry out audit of books of account, inspection of returns filed by telecom, insurance and stock broking companies. Explaining the rationale for identifying these three industries, officials stated since they were among the first ones to be earmarked as service sector companies, they have been taken up for consideration first.
Incidentally, these three services together contributed around 75 per cent to the service tax kitty of Rs 2,581 crore in 2000-01, and tracking them successfully was likely to result in substantial additional revenue, they said.
Sources added that the audit will be widened to cover other areas of the service sector, including information technology, later.
They said since customs duty was witnessing a substantial decline from last year and excise duty realisation was almost flat, it was imperative for the government to tighten the tax administration in the service sector which had a tax to GDP ratio of 50 per cent, while the overall tax to GDP ratio was only 9 per cent.
Elaborating on the parameters of audit, officials said companies with a turnover of Rs 1 crore will be subjected to an annual audit while companies with a turnover of less than 1 crore will be audited after every two years. Companies with a turnover of less than 10 lakh will be audited at random, sources said.