The Budget announced no change in the standard rate of excise duty and service tax, include two services in the negative service-tax list and exempt vocational courses and testing services from service tax. The Budget also announced a one-time amnesty scheme for service tax due from 2007 and will impose service tax on all air-conditioned restaurants.

Expectation:  India Inc has demanded that FM should abolish the service tax on telecom value-added services and reduce the tax burden to boost tourism industry. Industry representatives seek tax clarity and concessions from the Budget. This includes service tax levied on various components on services/ various types of services offered including fund management charges, policy administration charges and mortality charges. This also includes the service tax levied on distributors.

What last year’s Budget said: The government proposed to tax all services except those in the negative list comprising 17 heads and to harmonise central excise and service tax,  a number of alignments were made including the common simplified registration form and a common return for central excise and service tax, named EST-1. The Budget proposed to raise the service tax rate from 10 percent to 12 percent, with consequential changes in rates for services that have individual tax rates and the proposals from service tax were to yield an additional revenue of Rs 18,660 crore.