MARCH 01, 2015

By G Prabhakara Sastry Sr Consultant-Indirect Taxes

THE Budget-2015which expected the Finance Minister to make good certain omissions and issues that culminated into huge number of disputes gave huge disappointment.

None of the issues like abatement to manpower supply and security services are redressed. The government does not appear to understand how any business aiming at 4-5% profit can ever honour service tax demands of 12.36% with mandatory penalty and interest for an average period of 3-5 years could ever afford to raise and make payment. Such issues were addressed no.of times through columns of different websites and journals, representations to the Board, discussion of the issues by no. of Chambers of Commerce but nothing appear to reach the men in power and many of such effective service sectors are getting blow up their lives that threaten their very survival. The pace with which the budget before two years gave some retrospective exemptions made everybody to expect and aspire for similar favours, did not come true. On the contrary, huge attempts for withdrawal of exemptions are now withdrawn, having wide ramifications on the survival of many of the service providers,

What justification the government can offer for levy of service tax on Port and Airport constructions? The levy can only throw further burden in terms of finance and substantial burden by way of compliance in such construction activity. What great difference the government is finding between roads, railways, dams, tunnels and similar constructions when compared to ports and airports? While levying the tax did the government consider the necessity of abatement otherwise available for various construction activities? Do they realize the necessity now and issue fresh exemption meanwhile exposing the transitional period to further disputes? Such subtle issues are ignored presumably by indifference than by calculation.

As if the burden is now insufficient, the rate of service tax is proposed for increase from 12.36% to 14%.

In the case of excise duty, education cesses are done away with and only 12.5% of basic excise duty is payable but in the case of service tax, the same is leviable at 12.36% that too as 0.36% as cesses only till the enactment of the Finance Bill 2015. Is there a necessity to continue this hazy situation and if so, why? What will happen to the Cenvat Credit of cess of 0.36% after the enactment? Again they have to opt for transfer to service tax. Are these steps intended for simplification? Are these taxes rational and the provisions thereof logical? Before the Finance Bill-2015 is passed, we only hope that they will be resolved reasonably.