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Earlier  government has reduced the service tax to 10% from 12% . The government is now considering a proposal to restore the service tax to its earlier rate of 12%. In the third stimulus package announced in February, government has reduced service tax to 10%. The option for withdrawing the service tax cut is on the account of increase in government expenditure and an attempt to boost the economy.

Final decision would be taken by Finance minister in consultation with planning commission and Prime minister’s office (PMO). Service tax collection estimates to be collected around 60,000 crore, registering a growth of 18% even though collection in indirect tax declined due to the downturn.

There is another option to boost service tax collection by including segments like education, legal and medical service but finance minister would have to build political consequence. These sectors are sensitive in social sector point of view and taxing them could invite more oppose.

Links to refer:

http://economictimes.indiatimes.com/News/Economy

Tags: India, Service Tax, tax

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