Service tax net widened

Finance Minister P Chidambaram today proposed to extend the service tax regime while unveiling a move to double the exemption limit for small service providers to Rs 8 lakh.

The revenue loss from the hike in the exemption limit will be Rs 800 crore, Chidambaram said while presenting the budget for 2007-08, adding he was happy to give this sum away in the interest of small service providers and consumers.

He proposed to extend the service tax to services outsourced for mining of minerals, oil or gas, renting of immovable property for use in commerce or business, development and supply of content for use in telecom and advertising purposes, asset management services provided by individuals, and design services.

Service tax will also be levied on services involved in execution of a works contract. Chidambaram also made a proposal for an optional composition scheme under which service tax will be levied at only two per cent of the total value of the works contract.

However, services provided by Resident Welfare Associations to their members who contribute Rs 3,000 or less per month will be exempted from paying the tax.

Service tax will also be exempted on clinical trial of new drugs and services provided by technology business incubators. Their incubates whose annual business turnover does not exceed Rs 50 lakh will be exempted from the tax for the first three years.