You will just have to pay service tax at the rate of 3.6 per cent on AC train ticket and not at 12 per cent. Similarly, air travel and dining in restaurants will attract lower service tax because of the abatement being provided.
In an exclusive interview, the Central Board of Excise and Custom (CBEC) Chief, Mr S.K. Goel, clarified various issues related with indirect taxes. Excerpts:
Tax Target
Along with income tax – our target for next year has been put at Rs 5,05,000 crore. The targets have been revised upwards by 26.7 per cent. Part of it will be meet by the buoyancy and part by increase in rates.
It is a chicken and egg situation. There will be little impact in the short run. We are in a competitive economy so players cannot jack up the prices because of excise hike. Also two per cent is not big. Earlier, it used to be 14 per cent.
The Finance Minister does not want demand to suffer but needs money for development expenditure for the domestic industry to grow.
The hike on cycle imports was misinterpreted yesterday. The custom duty on cycles has been hiked to 30 per cent from 10 per cent. Not only will imported cycle become costly but the move will encourage domestic industry.
Growth is reviving. GDP growth is 6.9 per cent compared with previous years, which is good when compared to the global situation. Next year growth is estimated at 7.6 per cent and 8.6 per cent after that. Overall the economic situation is good.
Services sector is doing well. This will help in line with our intention to move towards GST. You cannot increase service tax without increasing central excise. I think industry will get used to it and people will realise its efficacy.
Implementation of negative list
Increase in service tax is applicable from April 1 and central excise rates applicable from March 17.
The negative list will be applicable after Parliament passes the Finance Bill and only after that will a date be notified. Sufficient time will be given to the districts to prepare. The earliest for the negative list will be July 1. But this is only an indication. Supply will be notified, comments will be invited. There will be some tweaking if necessary and applicable along with the negative list.
States' views ignored on Negative list?
I think there is a misconception on that. I have not heard from the States. We have taken the recommendation of the Empowered Committee that while introducing the negative list care should be taken that areas which are the exclusive State jurisdiction will not be taxed. This has been ensured. We are not levying tax on entertainment.
Amusements, betting, gambling are in the negative list. There is a Supreme Court judgment in a particular aspect (the) same thing can be service and other can be goods. For instance, transportation of good and services, foods served in restaurants and so on. We are not charging the food but the service of serving food is taxed.
Effective rate of Service Tax
We have laid a formula that so much would be presumed as service and so much for good.
We do not charge service tax on entire amount of railway ticket but only 30 per cent of gross value of ticket. That means the effective rate would be 3.6 per cent and not 12 per cent.
At the same time, service tax will be levied at 40 per cent of the gross air fare which translate into effective rate at 4.8 per cent. This is the same with bill in restaurants.
I think there is no difference from its treatment earlier for IT software. Negative list makes no change to treatment of software. If something more is required to be considered, we can.