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February 23, 2001
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Government favours bringing more services under tax net


The government is in favour of bringing in more services under the tax net to offset a likely loss of revenue through lower customs tariffs, a government document said on Friday.

"The growing contribution of services to GDP (gross domestic product) makes the sector conducive for mobilisation of greater resources," the Economic Survey for 2000/01, a report card on the economy, said.

It said a technical panel on the issue had submitted its report and its implementation would help in setting up an economically rational service tax that can be integrated with the central value added tax (CENVAT).

"A comprehensive service tax combined with an efficient CENVAT could help in raising indirect tax revenues to the levels that prevailed earlier.

"This would also make it possible to continue with customs duty rate reductions.

"Our basic (protective) customs duty rates are still among the highest in the world and there is broad agreement on the need for reducing them to Asian levels," the survey said.

Imposing a service tax on the revenues of India's booming software companies is one of the toughest issues confronting Finance Minister Yashwant Sinha as he prepares to unveil his budget on February 28.

Economic Survey 2000-2001
Budget 2001

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