Special Correspondent

Exemption limit doubled for small services

  • Levy on services outsourced for mining of minerals, oil or gas
  • Service tax to be levied on works contract

    NEW DELHI: With service tax collection witnessing buoyancy during the current fiscal, Finance Minister P. Chidambaram on Wednesday proposed to extend the tax net further even while seeking to double the exemption limit for small service providers to Rs. 8 lakh.

    Revenue loss

    The resultant revenue loss, Mr. Chidambaram noted, would be Rs. 800 crore but he was yet happy ``to give this sum away in the interest of small service providers and consumers.''

    Evidently, to make up for the loss in revenue, Mr. Chidambaram proposed to extend the levy to services outsourced for mining of minerals, oil or gas, renting of immoveable property for use in commerce or business, development and supply of content for use in telecom and advertising purposes, asset management services provided by individuals, and design services.

    As per the budget proposal, service tax will also be levied on services involved in execution of a works contract.

    The Finance Minister also proposed an optional composition scheme under which service tax is to be levied on only two per cent of the total value of the works contract.

    Services provided by resident welfare associations (RWA) to their members who contribute Rs. 3,000 or less per month will, however, be exempted from the tax.

    The tax will also be exempted on clinical trial of new drugs and services provided by technology business incubators.

    Their incubates, whose annual business turnover does not exceed Rs. 50 lakh will be exempted from the tax for the first three years, he said.