The decision to increase service tax and bring more categories under its net has caused severe resentment among the trading community in the city.
The Union Budget has proposed increase in service tax from 12.36 to 14 per cent with a provision to levy Swachh Bharat cess at two per cent. Service tax net has also been widened with the inclusion of new services and withdrawal of some exemptions such as government projects, including Defence establishments.
The traders, during discussions held on implications of budget on their businesses by the Confederation of Indian Industries, Vizagapatam Chamber of Commerce & Industry, and Andhra Chamber of Commerce & Industry Federation, expressed their ire at imposing heavy burden on them in the form of service tax, shrinking their profit margin. There is a feeling that inclusion of new services such as entry to entertainment events and amusements, job works to manufacture alcohol, services provided by mutual fund agent and distributor to a mutual fund will lead to escalation of cost of all products and services. “The proposals to increase service tax collections will hit every businessman and individual directly or indirectly,” Andhra Chamber of Commerce & Industry Federation vice-president G. Sambasiva Rao told The Hindu .
Enhancement of service tax would adversely affect the IT units in the Special Economic Zone based in the city, which act as vendors for Indian arm of Google, Oracle, Yahoo, Microsoft, and other multinationals. “For every invoice raised domestically, 12.3 per cent service tax has to be paid even if there is delay in client payment. If invoice is raised, this has to be paid. Previously, we could pay after payment by the client and it used to be 10 per cent. The decision will kill growth of IT units,” Rushikonda IT SEZ vice-president O. Naresh Kumar said.
