New Service Tax Structure a Step Closure Towards Proposed GST

Shri Pranab Mukherjee has proposed various measures while presenting the budget for 2011-12, to achieve a closure fit between the present service tax regime and its GST (service and goods tax) successor. These measures would include:

- Bringing in a few new services into the tax net to expand the tax base while ensuring that the impact is predominantly on sections of society that have the ability to pay;

- Suitably expanding or rationalizing the scope of existing service categories;

- Rationalizing certain provisions relating to import of services and valuation;

- Modifying provisions of the Cenvat Credit scheme to achieve a more realistic balance between input credits and output tax and harmonizing the provisions of the scheme across goods and services;

- Rationalizing penal provisions to reinforce the message that honest taxpayers would be facilitated and deviants would be dealt with severely; and

- Adoption of Point of Taxation rules for services which would shift the basis for tax collection from "cash" towards "accrual" basis as with Central Excise duty.

Source : Equity Bulls

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