Taxing Times As ‘Service Tax’ Upped Two Per Cent

Ashish K Tiwari - Mumbai

The services offered by hospitality and related service providers have got dearer by another two per cent. Not only that, a host of new service providers have been brought under the ’Service Tax’ purview besides the existing 58 announced in Union Budget 2003-2004. These new services, as declared by the finance minister, include outdoor caterers, pandal and shamiana contractors, business exhibition services, airport services, services provided by transport booking agents, transport of goods by air, survey and exploration services, intellectual property services other than copyright amongst others.

Though the actual increase in the tax rate is two per cent, service providers brought under the purview of this tax will now have to bear an additional two per cent surcharge on account of ‘education cess’.

A surprising aspect about Chidambaram’s speech was that he included outdoor caterers, pandal and shamiana contractors, services provided by transport booking agents and travel agents in new services to be taxed whereas they were already under the tax purview since the previous budget. The only things new here are the additional levies. ”We were already paying eight per cent service tax since last year so what is the logic behind saying that new services like ours have been brought under the service tax fold,” said Sanjay Mehra, proprietor of Divya Punjab Caterers & Decorators, Navi Mumbai.

Voicing his concern on the service tax increase, another caterer and decorator based in north Mumbai suburbs, cautioned, “Levying such taxes will lead to increase in unscrupulous practices by service providers as the customer doesn’t want to bear additional expenses. We would be forced to operate without issuing bills for our services offered.”

Speaking on behalf of the travel agents’ fraternity, M S Chowdhary, financial controller, Citizen World Travel, felt that the 10 per cent service tax levy is a burden on travel service providers. He said, “No customer wants to incur additional cost. The travel agents have borne the brunt last year when service tax was introduced. An increase of two per cent would further impact business for players who deal specifically with corporate clients as they can do nothing but follow the rules and regulations prescribed by the government. However, the non-registered travel agents would have an advantage as they don’t have to bother about this levy and can offer services without charging the service tax to the customers.”