Uttar Pradesh - Now 12.5% VAT on 36 services

Come value-added tax regime from January 1 and a vast array of service providers enjoying tax holiday at present will find themselves suddenly in a tax-net in Uttar Pradesh.

The state government proposes to impose flat 12.5% tax on 36 identified services. So, if the draft proposal is any cue, hiring photography services will be costlier. Likewise, private security agency services will be taxed.

This also holds true for the real estate agents’ services. Services provided for event management, club association, producing programmes of different nature, entertainment by commercial artists, besides cleaning activities and catering facilities will be taxed.

Under the present regime, many these services are not included under the tax-net and in cases of others, tax is levied on the basis of compounding scheme. But under VAT, their services would be treated like any other trade and taxed and assessed as per the rule.

In fact, this is a part of the government’s exercise to overcome the shortfall of the revenue collection under VAT regime initially. What is most disturbing for the government at present is that the revenue collection has gone down drastically this year in spite of its best efforts to increase it.

Admitting this, an official said, ‘‘We are indeed clueless to the shortfall of revenue collection, which so far remains only about 54% of the total projected revenue collection of around Rs 18,000 crore by the end of this financial year on March 31.’’

Source : The Times of India, dated 17/12/2007