It is learnt from sources that finance ministry is likely to strengthen the service tax regime and plug loopholes in sectors like construction, oil and gas, telecom, works contract and industrial construction and will come out with clear guidelines removing ambiguity in its Budget for 2011-12.
The sources said that currently, there are no clear guidelines on cost and revenue sharing arrangements in the oil and telecom sector.
At present, many oil companies come together and form consortium to work on oil blocks. In such cases, consortium leader operates the block and distributes the profit as per arrangement among others.
Similarly, telecom companies share towers of other companies to cut on their cost.
“It is difficult to evaluate tax component in such cases. We want to remove the ambiguity from such cases,” the sources added.
As regard the construction sector, though the finance ministry came out with many clarifications last year, ambiguity still remains. Like, for instance, if there is a sale of apartment or property, real estate sector says that it should not attract service tax as stamp duty is leviable on the property. Likewise, there is no clarity on goods and services component.
“So what should be charged as service tax and what should become the part of goods gets disputed,” the sources said. On the rental of immovable property given on long-term lease, tenure of lease is also disputed.
In case of works contract and industrial construction, the same problem persists. A tax of 4 per cent is leviable on the entire contract value or a service tax of 10 per cent is levied on the service component. However, determination of service component remains a problem.
KPMG executive director, indirect tax, Pratik Jain said, “there is lack of clarity in the construction sector that is in which case service tax should be levied. In oil and gas also there is always an ambiguity on cost sharing.
The government needs to come out with clear guidelines in such cases”. The government is also planning to bring many new services under the service tax net as a prelude to usher in the new indirect tax regime.
Please Comment, Like, Vote and Retweet the Poll.