It is exactly a decade since service tax as a new levy was introduced in 1994 and the Central Board of Excise and Customs was entrusted with the job of tax collections. But thanks to the wavering governmental mood, this new levy was never free from the risk of being hijacked by a new department or an agency.
In fact, only recently it had a narrow escape when a quiet but powerful attempt was made to poach on it. Files walked through the powerful tables and reached the critical stage when comments were sought from the CBEC and the Revenue Secretary.
And, predictably, both opposed the proposal vehemently by giving a litany of arguments.
Though their opposition stalled the move for the time being, it continues to run the perennial risk of being taken away from the CBEC. No doubt, it had not come to CBEC as a gift but as an indirect tax levy, that it is, but the CBEC has not lived up to the potential of this levy.
And this is what prompts many others in our bureaucracy, who are on the prowl for more space, to keep making poaching attempts at this levy. Worse, the CBEC comes to know about it when the battle reaches the critical stage. A case of poor intelligence, indeed.
Let us take a look at what our Apex Court has to say about this new levy. While deciding the service tax levy on Mandapams and Outdoor Catering (2004-TIOL-36-SC-ST) 10 days back, the SC observed that "service tax is an indirect tax and is to be paid on all the services notified by the Government of India for the said purpose. The said tax is on the service and not on the service provider."
This remark of our Apex Court should make it abundantly clear to the government that it is no way any other tax except an indirect one and it should certainly remain a part of CBEC.
Despite unimpressive implementation output, it has got integrated into the existing Central Excise collection mechanism. Though such a decision made sense in its inception as it was a trial or, call it, the settling period for the new levy but it is now becoming suicidal to continue it as a part of Central Excise administration.
Why? although the traditional ghost of Central Excise is dead but their souls continue to haunt the department. So, before service tax collection mechanism gets fully infected by the prevailing pejorative culture of Central Excise, it should be delinked and a modern tax administration of a kind not seen in India should be put in place.
But, the community of doers and dreamers in CBEC appears to be highly endangered species! Spoilers rule the roost. There are many who appear to be hatching their own eggs.
For instance, one of the approach papers which the CBEC looked into was about setting up full-fledged Service Tax Commissionerates headed by ADGs who would in turn report to DG, Service Tax! This proposal is nothing but a crude attempt to extend the fiefdom. The existing controlling structure should not be disturbed. Independent commissionerates should be set up, to begin with, in the four metros and proper care should be taken for staffing them.
Ideally, the prospective officers should be put through a rigorous re-orientation programme aided by IT tools and a modern set up with the necessary taxpayer-friendly facilities should be put in place. A great deal of damage is being done to this new levy by involving Central Excise rogues who appear to be scaring away small-time service providers from joining the tax net.
It is learnt that the CBEC has initiated an exercise in this direction and intends to put up a proposal as soon as the new government takes the oath. But apart from the administrative changes, the CBEC also needs to bring a full-fledged legislation in the forthcoming Budget so that the elements of inequity which have crept into the law regulated by notifications could be taken care of.
Simplicity in intricacies should not be our objective while finalising this new legislation. In true sense, it should be simple enough to encourage taxpayers to visit the tax offices for filing their returns.
It would also be desirable to disband the Directorate General of Service Tax which has done nothing but to add to the prevailing confusion in the practices of the department. If our decision makers think that it does help, then similar directorates should be created even for customs and central excise. The fact that no such attempt was ever made, this model doesn't help either the revenue department or the taxpayers, so this white elephant should be dismantled and the same fund and manpower could be used for the new commissionerates.
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