Service tax collection for April-May09 down 7%

Service tax collection of the government has taken a beating this fiscal with the amount mopped up on this account falling more than 7 per cent to Rs 5,675 crore in the first month of 2009-10 as compared to the the same period last year.

The service tax collection for the April-May 2009 period is pegged at Rs 5,675 crore as compared to Rs 6,121 crore in the same period last year, the government said in a reply in the Lok Sabha.

The service tax rate was reduced from 12 per cent to 10 per cent as a sop given to sagging economy. The measure was announced in the interim budget as a stimulus to the economy.

The tax collection has also suffered on account of the global financial meltdown which has even hit the indirect tax kitty of the government including the service tax collections.

Service tax collection is expected to grow each year with the sector expanding.

The service tax revenue collected during the year 2008-09 was higher at Rs 60,716 crore as compared to rs 51,301 crore in 2007-08. In the same sector the tax was Rs 37,598 crore in 2006-07, the government figures say.

There are also expectations that the service tax rate could be rolled back to the earlier 12 per cent level and include many other services in the category to expand the tax base.