The Hindu : Business : 7 more services under tax net from June 1

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Wednesday, May 23, 2007
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7 more services under tax net from June 1

Special Correspondent

NEW DELHI: Starting June 1, seven more services such as renting of property for use in commerce or business, works contracts and various telecom related services are set to cost more as the Government on Tuesday issued a number of notifications to bring them under the tax net.

As per the notification issued by the Central Board of Excise and Customs (CBEC) here, effective June 1, service providers of these seven service categories will have to pay a service tax of 12 per cent along with the three per cent additional cess. The notifications, allowing for exemptions in certain cases, were issued to give effect to some of the provisions of the Finance Act, 2007, to put these services under the tax net as announced by Finance Minister P. Chidambaram while presenting the budget for 2007-08. With this, the total number of taxable services adds up to nearly 100.

From next month, providers of telecom-related services will have to pay service tax on facilities such as telephone connection, pager, leased circuit, telex, telegraph and fax communication.

Property tax deductible

As for renting of property for commercial use, property owners have been provided a marginal relief by way of the property tax being deductible for the purpose of calculating service tax on the commercial rentals. However, any penalty paid under property tax cannot be deducted.

The notification also extended the service tax net to include maxi-cabs that are capable of carrying more than 12 persons for educational bodies or vehicles for driving schools, and rent-a-cab services, tent services, event management and manpower recruitment.

It, however, has exempted services provided for execution of works contract in relation to port construction. At the same time, services provided for repair, renovation, restoration, maintenance or repair in relation to existing ports would be liable to service tax.

Conceding the construction sector's demand, the Government has provided service providers of work contracts with an option to pay service tax equivalent to two per cent of the total value of the works contracted, instead of paying service tax at the specified rate.

Small service providers

Also, to provide relief to the small service providers, the Government has increased threshold limit for service tax exemption from Rs. 4 lakh to Rs. 8 lakh.

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