A Small introduction of Service Tax

The share of the services sector in the GDP of India has been going upward for the last decade. The introduction of service tax in 1994-95 by the Government of India has started paying the government for its tax revenue front. Introduced to redress the asymmetric and distortionary treatment of goods and services in the tax regime, the service tax has seen a gradual Expansion in the country. The tax was introduced with only three services liable for taxation, gradually extended to over 100 services by 2007-08. The rate of tax has been risen to 12 per cent by the Union Budget 2012-13 which becomes 12.33 per cent on account of the education cess.

In 2011-12, growth in service tax revenue was 37.4 per cent amounting to Rs. 97,579 crore, which indicated that service tax has been emerging as an important source of revenue (Union Budget 2012-13 had a growth target of 30.5 per cent in the revenue from service tax over 2011-12). 20 As against the usual practice of expanding the list of services, the Budget for 2012-13 introduced a 'negative list' approach effective July 1, 2012. Service Of transportation of passengers with or without accompanying belongings by railways in first class or an air conditioned coach and services by way of transportation of goods by railways has been subjected to service tax effective October 1, 2012.

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