Slapping someone who’s already paralysed !
For a common man it’s like this : I, Arun Anand, Go to a Travel Agent to get my 2nd class sleeper ticket done. Ticket costs 1000 rupees. Now I’ll pay 12.2% tax vis-à-vis 10.2%. Agreed ! Now if I go to ATM or use Credit card to pay that money, another % (say 3 to 4% based on their cost of maintenance, operating etc on the ATM) of service tax will come on that – Thanks to the “professional” banks like ICICI who just wait to pass on everything to their customers. So altogether my Service Tax liability works out to be 15-16% easily.
Hats off to Mr. PC!! A middle class person who needs to send Rs.1000 as a DD to his son who is preparing in Kota for IIT may have to shell out a service Tax (its not clear what amount will be charged on DD or cheque. It should be 12% on the cost of the transacting the DD and not on value of DD). And this son has to of course shell out 12% in the coaching services (that’s already there)
Now if you are a corporate, there is something more dangerous than FBT. This is named here as service tax on “Business support services” which could range from services hired from a house-keeping organization which waters the plants to services hired by Biggies like ICICI from Infosys or SBI from TCS. Businesses typically outsource to save 10-15% of their costs and Mr. PC easily siphoned off out 12.2% from this hard earned savings. And he wants Gross Domestic savings to increase – Yes it’ll if you believe that government will save this receipt.
Exhibit: A tip of the Iceberg – Excerpts from Finance bill
‘(104c) “support services of business or commerce” means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing.
‘(86c) “public relations” includes strategic counselling based on industry, media and perception research, corporate image management, media relations, media training, press release, press conference, financial public relations, brand support, brand launch, retail support and promotions, events and communications and crisis communications;’;
Explanation 1.—For the purposes of this sub-clause, “sale of space or time for advertisement” includes, —
(i) providing space or time, as the case may be, for display, advertising, showcasing of any product or service in video programmes, television programmes or motion pictures or music albums, or on billboards, public places, buildings, conveyances, cell phones, automated teller machines, internet;
(ii) selling of time slots on radio or television by a person, other than a broadcasting agency or organisation; and
(iii) aerial advertising.
Now if you hire the services of a consulting or Market research organization or a call center, 12.2% extra cash outflow is inevitable. BPO’s will include in their Invoice’s another 12% service tax. Forget all this – Even if you want to advertise indoor or outdoor except in print, you’ll have the Service Tax follow you like “Dog in The Hutch Campaign”. Now I wonder how long could Hutch advertise the Dog on hoardings given that there is another watch dog on “service” alert.
If I am business hiring services worth Rs 100 from 10 companies, I pay Rs 112 for each transaction thus totaling my bill to Rs. 1120. Now let my net input cost be Rs. 1000. Now let the Value added by me is Rs 2000. Thus my output price is Rs. 4120. Suppose the VAT payable by me is 10%, this 10% will be charged on all the value I added – Including that of service tax which I shelled out to buy services from others. So my VAT 10% will be on Rs 3120 and not on the Rs 2000 which is my actual value added. So VAT being charged on service Tax and service Tax on being charged VAT will be very much seen in the coming days. Though Dual taxation is avoided, it gives rise to quadruple or triple taxation regimes.
Now another point – service tax is applicable on sponsorships of events too. If as an MBA student I request Tata Motors to sponsor an event of our college by giving a Lakh rupees, Tata motors will think twice – either they’ll have pay me that amount along with the tax or they’ll pay me around 90, 000 so that with tax it becomes 1 Lakh. But if Sony is sponsoring a mega Cricket Match series with Billions of views and a Billion $ worth transaction, It shall NOT attract any service Tax as Service tax is not applicable if you sponsor Cricket or sports.
Rural sector lending, Focus on Infrastructure are all good. But the Money is siphoned off from the middle class and is transferred to Poor and The rich!! We, who are already sand-wiched are again jammed. Rich dads and Poor Dads remain the way they are !!
Regds,
Arun Anand
MBA Student, NMIMS
My blog site : https://arun-p-anand.blogspot.com
arunpanand@gmail.com