A group of students, led by Akshita Yadav (MA-Eco, CESP-JNU) has prepared a report titled 'A Study of Service Tax - in theory and practice' during Summer 2014 Batch of Internship with Consumers India. The issues raised are important for all of us as consumers and responsible citizens. An abridged version of their study report is given below.
A STUDY OF SERVICE TAX – IN THEORY AND PRACTICE
Akshita Yadav, MA-Eco, CESP, JNU-Group Leader
Priya Agrawal, BMS, Shaheed Sukhdev College of Business Studies, DU
Neha Yadav, BA (H) Eco, SRCC, DU
Jyoti Yadav, BA (H), Eco, LSR, DU
Surbhi Oberoi, MA-Eco, JNU
Mentor: Shri S K Virmani
The Service sector in India has witnessed rapid growth in the past decade. It covers a wide range of activities, such as trading, transportation, communication, financial, real estate and business services, as well as community, social and personal services. It currently contributes to about 66% of total GDP and provides employment to about 27% of the work force.
Service Tax is a form of Indirect Tax levied by the Government of India on all services other than the services in the negative list of services. (There are 17 services in the negative list like postal services, transportation of goods and passengers, agriculture related services etc). The provisions relating to Service Tax were brought into force with effect from 1st July 1994. It extends to the whole of India except the state of Jammu & Kashmir.
Why does it matter ?
The Govt of India had collected Rs 1.32 lakh crore as service tax revenue during 2012-13 as against Rs 407 crore in 1994-95. According to this data, there has been an increase of over 300 times in revenue collection from service tax in the past two decades, making it an important contributor to the government exchequer. Service tax accounted for approximately, 28% of the total government tax revenue (direct + indirect) in the year 2012-2013.
It is this tax revenue that fuels our government and its various institutions dealing with a wide array of activities, all of which are extremely crucial for our country's growth and the well-being of all its citizens.
Many consumers continue to remain unaware and ignorant of service tax and VAT rules concerning them, which in turn allow baleful producers to take advantage of such consumers, allowing them to make profits by unfair means and practices, resulting in massive amounts of tax evasion!
Service tax evasion of nearly Rs 8000 crore was detected in the financial year 2013-2014 by the finance ministry. In the year 2012-13 as well, the DGCEI had detected 841 cases of service tax evasion involving government's revenue of Rs 4,693 crore.
Can India, a developing country, afford this?
We have chosen following two services for this study