Economy & Banking Current Affairs

Business, Economy and Banking in Current Affairs 2019 with latest news and current affairs in Agriculture, Industry, Banking, Capital Markets, Import and Export and Government schemes in commercial sector.

Service Tax revenue grew over 300 times in past two decades

Finance Ministry is focusing on service tax revenue which has grown significantly by over 300 times in past about two decades.  As per official data, the finance ministry has earned revenue of about Rs 1.32 lakh crore in 2012-13 (provisional figures) compared to Rs 407 crore in 1994-95.

The ministry had set a target for 2012-13 to collect Rs 1,32,697 crore but the actual realization was Rs 1,32,518 crore.  The number of assessees have also increased by over 400 times since 1994-95.

Revenue from service tax has witnessed such a tremendous growth on account of surge in number of services being covered which led to increase in number of assessees under service taxation. During 2012-13, there were about 17.12 lakh registered assessees for the levy compared to only 3,943 in 1994-95 when service tax was brought in. The total number of taxable services has also increased from 3 in 1994 to 119 in 2012.

It is worth recalling that on July 1, 2012, the finance ministry had introduced the concept of taxation of service tax based on the ‘negative list’ which authorized government to tax almost all the services mentioned in Section 66D of the Finance Act.

Voluntary Compliance Encouragement Scheme (VCES)

The Finance Ministry is implementing VCES which allows a service tax defaulter to pay dues without any penalty or late payment charges.  Under VCES, an individual may make a declaration to the designated authority on or before December 31, 2013.

Why Voluntary Compliance Encouragement Scheme (VCES)?

It has come to the notice of the government that of the 17 lakh people who voluntarily registered themselves as service tax providers only 7 lakh actually paid service tax, the remaining 10 lakh did not. Though these people have charged the service tax from their customers but have not These non-payers are classified as no-filers or stop-filers. No-filers are those who have never filed service tax whereas stop- filers are those who have paid for a year or two but later stopped filing service tax. In order to make these evaders pay the due service tax the government has chosen VCES path rather than forcing them through punitive action.

The ministry has set an indirect tax collection target of Rs 5.65 lakh crore for 2013-14, through customs, excise and service tax. That figure is up from the Rs 4.73 lakh crore collected in the fiscal 2012-13.

Fiscal deficit to be around 5.2% in FY14: CRISIL

As per ratings agency CRISIL, government will miss its 4.8% fiscal deficit target by 0.40% this fiscal 2013-14 and suggested Public Sector Units (PSUs) should dip into their cash reserves to reduce the gap by paying extra dividends.

As per the rating agency, taking into account the current scenario, wherein the front loading of expenditure has resulted in 84.4% of the budgeted fiscal deficit target being hit by November 2013, the fiscal deficit is expected to touch 5.2%. As per CRISIL, the government can narrow down its fiscal deficit by as much as Rs 20,000 crore this fiscal by using cash reserves of PSUs. The agency says that top 20 PSUs will have a cash reserve of Rs 1,60,000 crore by March 2014 and are “comfortably placed” to pay a special dividend of 40% of the corpus (Rs 64,000 crore) without impacting growth plans. This amount will be Rs 27,000 crore more than the dividend paid by the companies in 2012 and after calculating the stake of the government in the firms, will lead to excess revenue of Rs 20,000 crore. This Rs 20,000 crore extra income would make around 20 basis points of the fiscal deficit, which can help the government reach nearer to its stated fiscal deficit target of 4.8%. The agency expressed concerns over the revenue collections from the taxation and also about the Government not being able to reach its Rs 40,000 crore divestment target.