There is no justification for increasing the service tax from 10 to 12 per cent with almost 90 per cent of the services being taxed in the Union Budget for 2012-13 as against 9 per cent of the services sector earlier, says Convener of Tax Law Research Forum G. Prabhakara Sastry. However, extension of the tax on all but 18 covered in the negative list was sure to increase classification disputes since many services were in the borderline. When it becomes contentious, it will be the prerogative of the department to say whether it is taxable or not, irrespective of how the assessee feels.
It would be difficult for the average assesses to grapple with the amendments made to service tax law, he opined. He lauded doing away with service tax on road repairs hanging fire for eight years with retrospective effect as was the relief to government-related contracts.
