The Centre is weighing the option on account of spiralling government expenditure, a result of the government's attempts to boost the economy, and shrinking revenues during the slowdown in economic activity, according to a senior government functionary who did not want to be identified.
The final decision on the issue would be taken by finance minister Pranab Mukherjee in consultation with the Prime Minister's Office (PMO) and the Planning Commission, the source said. One view that has emerged is that the worst is over and the government should take steps to signal a gradual shift to fiscal discipline.
According to provisional estimates, service tax collections in 2008-09 were around Rs 60,000 crore (registering a growth of around 18%) even though indirect tax collections declined due to economic slowdown. This booming segment should not suffer due to concessions provided to India Inc, feel some sections within the government, including the revenue department.
Source: Economic Times Service tax may return to
12% rate
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By ugesh sarkar, Section Taxation - Service Tax
Posted on Thu Jun 11, 2009 at 02:53:07 AM EST
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The support of allies like the DMK and TMC may not be forthcoming for such measures, they added.
While the government had launched its stimulus efforts with a cut in excise duty, the third stimulus package, which was the last before the elections, reduced service tax rate to 10%.
As the goods & service tax (GST) is to kick in next April, some sections in the government think that indirect tax structure can be left undisturbed at this juncture. Introduction of GST provides an occasion for modification of the indirect tax burden on industry, they say.
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