India has decided to surpass the ambitious target of Rs 175 billion from services' sector through an intensive campaign during fiscal 2005-06, whereas Central Board of Revenue (CBR) is still not able to devise a practicable policy for broadening the tax base.
In Pakistan, the total sales tax target has been fixed at Rs 294 billion in 2005-06 against Rs 239 billion in 2004-05. This target would be achieved from GST collection at the import stage as well as on domestic consumption.
CBR's quarterly report revealed that manufacturing sector still bears the major burden of taxation, ultimately passing it to the end-consumers, while other sectors like agriculture and services were either out of the tax-net or slightly taxed. No wonder that the tax/GDP ratio of Pakistan is one of the lowest in the world.
A tax expert told Business Recorder on Sunday that the Directorate of Service Tax, Mumbai, Department of Revenue, Ministry of Finance, India has taken solid measures to improve administration of 'service tax' during the current financial year.
First, target of Rs 175 billion 'service tax' for 2005-06 would be surpassed. Secondly, it has been decided to intensify the field survey operations to ensure that all taxable service assessees are brought into the tax-net.
In this regard, an action plan for 2005-06 will be monitored at various levels on a monthly basis. While the basic concept of 'service tax law' is voluntary compliance, the recalcitrant/ habitual evaders of 'service tax' will be booked for appropriate action under the law. There would be no leniency in this regard.
India will introduce amendments (statutory change) in the law to prosecute frequent offenders/tax evaders.
Sources quoted Indian tax department as saying that India will design and implement an Electronic Tax Administration (ETA) system for service tax so that the tax could be administered as first e-tax of the country.
Directorate General of Systems have developed software for electronic filing of ST-3 returns for 10 major services. All the Chief Commissioners have been requested to arrange meetings of service providers and service tax staff to inculcate the awareness about e-filing of returns/e-tax administration.
Indian tax department is also concentrating on liquidation of 'service tax arrears' and would issue necessary clarifications to the field officers so that arrears linked up with disputed interpretations of the provisions of the law could be easily resolved. It would give priority to all major court cases relating to 'service tax' law for early decision. The concerned department would deploy adequate staff to attend to the service tax work and provide infrastructure and conveyance to implement the law effectively.
Many new services will be brought under the tax-net in future. The inclusion of all value-added services in the tax-net would yield larger amount of revenue and make the existing tax structure more elastic, Directorate of Service Tax, Mumbai maintained.
The tax expert said that it seemed that the India was working on a comprehensive plan for brining more service providers within the 'service tax' net.
Instead of searching for new ideas in Europe, Turkey and other countries, the CBR could merely examine the Indian taxation system to broaden the tax-base. Recently, collectors of sales tax conference was held in Islamabad, but no major decision to increase GST from services sector was taken. Conference mainly focused on issues relating to e-filing and refunds without giving serious thoughts to the services sector.
Even proposal of collecting Rs 2,500 million from financial services was dropped in budget 2005-06.
It was proposed to levy excise duty on fees and commissions charged by commercial banks for services provided in relation to letters of credit, guarantees, brokering and foreign currency dealings and levy of excise duty on the service charges in respect of leasing services provided by leasing companies including Modarabas and Banking Companies including Commercial Banks. These proposals were not incorporated in budget 2005-06, the expert added.
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