Revenues from service tax
For projecting service tax, the most buoyant source of revenue, in view of the major changes since its introduction in 1994-95, historical buoyancy was not considered to be a reliable method to follow. The 2007-08 (BE) figures were taken as the base and though the scope for further expansion of base and rate is limited, given the room for improvement in the level of compliance and probable loss because of SEZ development, it was assumed that service tax collection will grow by 25 per cent in the four years of the Eleventh Five Year Plan, beginning from 2008-09.
Service Tax Revenue (In rupees crore)
2005-06 | 2006-07 (RE) | 2007-08 (BE) | 2008-09 | 2009-10 | 2010-11 | 2011-12 | |
Growth of GDP at factor cost at current prices in per cent | 13.8 | 14.4 | 13.0 | 13.0 | 13.0 | 13.0 | 13.5 |
Growth of service tax revenue | 62.36 | 65.56 | 40.00 | 25.00 | 25.00 | 25.00 | 25.00 |
Projected Service Tax Revenues | 23,055 | 38,169 | 50,200 | 62,750 | 78,438 | 98,047 | 122,559 |
Service tax revenue-GDP at factor cost ratio in per cent | 0.71 | 1.03 | 1.20 | 1.32 | 1.46 | 1.62 | 1.78 |
Service tax revenues, according to the projections, increase more than three-fold from Rs. 38,169 crore in 2006-07 (RE) to Rs. 122,559 crore in 2011-12. As a proportion of GDP, the increase is from a little over 1 per cent of GDP in 2006-07 (RE) to 1.78 per cent in 2011-12.
Loss due to SEZs:
The total area covered by the notified SEZs is 67 square kilometres, while area covered by the formally approved SEZs would be 350 square kilometres, which is small in comparison to the area covered under domestic tariff area (DTA) units. Exports from SEZs is expected to cross Rs 100,000 crore in 2008-09. The units in SEZs will be exempt from customs duties, income and corporate tax, and service tax. The movement of goods to DTA areas will be on payment of applicable rates of duty. The loss of revenue for 2005-2010 from indirect taxes, viz, customs duties, excise duties and service tax assessed, based on investment lined up for 70 SEZs, was estimated at Rs 29,700 crore, Rs 10,368 crore and Rs 8,813 crore, respectively. Loss of revenue from SEZs for the four years of the Eleventh Five Year Plan have been assumed at 5 per cent for customs revenue and 2 per cent each for excise duties and service taxes, based on the investment of 70 SEZs.
Source: The report of the Working Group on Centre's Financial resources for the Eleventh Plan.