With a view to eliminate intra-service and inter-service sector distortions, the Central Board of Excise and Customs (CBEC) has decided to do away with the imposition of a threshold limit of exemption from service tax.

Currently, an 8% service tax is levied on 61 services with a revenue estimation of Rs 8000 crores (approx US $ 1.7 bln) accruing to the government from the imposition of this tax. With a service tax assessee base of just over three lakh (approx US $ 6666), there is no justification in weeding out assesses by having a threshold limit for exemption, at least in the near term according to the Board.

The Board's views, which are set to be considered during Budget formulation, run contrary to recommendations made by an expert committee on service tax and the Kelkar Committee on indirect taxes. The Kelkar panel suggested that all service providers, who provide services up to the value of Rs 10 lakh (approx US $ 22222), in a financial year should pay a total tax of 1% on the value of services. Such service providers would not be entitled to avail credit on the duty paid on inputs, but would be exempt from normal procedures of return and documentation.

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Sixty IT companies have set up shop in Pune in the first half of the current fiscal, with a resulting upbeat tone on the targeted IT revenues for the year. While projected revenues were initially in the area Rs 4,200 crore, these have now been revised to Rs 4,500 crore (about $1bn).

Attributing these positive trends to the cities infrastructure as well as the availability of local technical skills, local STPI officials stated that for most foreign investors the choice of destination is usually either Pune or Bangalore. While Bangalore has long been considered the IT hub of India, Pune can now boast of 600 plus IT companies with another 40 to be registered by March ‘04.

This has also lead to a spate in recruiting. While the numbers are proportionately high for large companies, for smaller companies the increase is often 100%.

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