The State of Jammu & Kashmir so far, exempted from the clutches of service tax, will soon have 14 services under the tax net. As per the reports, a flexible service tax law conducive to the State would be enacted, which will come into force within a year. Unlike the Centre, which levies service tax at 12.36%, in Jammu & Kashmir the tax would be introduced with a low rate of 8.5%.
The Service tax was introduced in India in 1994 covering services of telecom, stock broker and general insurance. Now the tax web includes 100 services. The service tax was not levied in J&K till now to help the State’s economy recover from the aftermath of terrorism.
Services such as banking, telecom, insurance, work contracts, photo-finishing, hotels, beauty saloons, nursing homes, advertisers, courier agencies, banquet halls, catering agencies, cable operators and commercial professional training and coaching centers will come within the ambit of service tax. These are the niche services in the State, contributing good share in the growth of state economy.
If one takes note, most of the short listed services are indirectly related to tourism which is the backbone of the State’s economy, with many sections of society depending on this for their livelihood. Instead of directly imposing service tax on tourism (tour operators, air and rail travel agents), the government seems to have taken an indirect course by taxing services such as banking, telecom, insurance, photo-finishing, hotels, nursing homes, advertisers, courier agencies and catering agencies.
It is expected that the proposed tax would give the State authorities a revenue collection of over Rs.100 crores. But with the government preparing for elections to be held next year, it is doubtful whether it would make the people feel the pinch of service tax.
In future, if the state gets expected benefits, then it may increase the ambit and scope of service tax net to include more services. It is a good sign for India, as it heralds the coming of J&K into the mainstream Indian economy.
So be prepared to shell out more if you are planning a stay at the state’s House Boat or making a phone call.