Budget 2015: Service sector needs to be taxed or no service from govt, says Jaitley

New Delhi: The service sector needs to be taxed or you will get no services from the government, quipped Finance Minister Arun Jaitley while answering a question on the need to increase taxation on services. He was replying to queries on what was the need to further increase taxation on services - one of the Budget proposals raises service tax to 14 percent from 12.5 percent. This is going to make many things like eating out more expensive for the middle class.

To another question on the comments of former prime minister Manmohan Singh, who said the Budget reflected lot of good intentions but lacked any clear roadmap, Jaitley merely said “thanks”. When a journalist wanted to know which were the big bang ideas in the Budget presented earlier today, Jaitley turned to her and asked which was the one big idea which she thought should have been included and was not. Of course, the finance minister went on to say that many big ideas have been incorporated.

Earlier, in his opening remarks, Jaitley repeated what he had said during the speech in Lok Sabha - that in working towards higher economic growth rates while remaining within limits of fiscal prudence dictated his decision to push back the achievement of 3 percent deficit target by one year. He also pointed out that by doing this, the government has managed to increase public spending while at the same time giving more money in the hands of the middle class and also encouraging them to save more.

Coming back to Jaitley’s quip on raising service tax, the minister explained during the interaction that Agriculture was not taxed in India and the only other sector (outside of services) which could be taxed is manufacturing. With Prime Minister Narendra Modi’s ‘Make In India’ cry reverberating throughout the Budget speech, of course it would have been counterproductive for his finance minister to hike taxes on manufacturing. Which is why he had to raise the service tax.

Even the negative list of services has been pruned, which means more services are now under the tax net including rides, bowling alleys, amusement arcades, water parks; services provided for admission to entertainment event of concerts, non-recognized sporting events, pageants, music concerts and award functions.

Here’s what the minister said on other points which were raised by the media:

1. on whether RBI will support his fiscal roadmap by lowering rates: Jaitley said we must wait and see, must have some patience.

2. will having more BJP ruled states plug subsidy leakages: Leakages are not an issue of any particular political party, none would like these to continue. Oil and diesel are already market linked, we are now implementing cash transfers for LPG and plan to do this in toto. He said he has already appealed in the Budget speech to the more affluent in society to relinquish subsidies

3. On whether the government will look at divestment in loss making PSUs: He merely said this government is not averse to the idea of a strategic sale but no specifics in which PSUs are to be put up for divestment will be spoken of

4. On the enabling provision of Swacchh Bharat cess in the Budget proposals: He said there is no timeframe for implementation, it is merely an enabling provision. Some amount has been allocated to fund the Swachch Bharat mission in the Budget, if it falls short this provision will be triggered

5. On not providing any relief in income tax to the middle class: He said first of all economic development (which has been envisaged in the Budget) will benefit everyone. Then, if one takes the rebates he announced in the interim budget last year with measures announced this year, the middle class will now have much more money in its hands besides also being encouraged to save more

6. On whether there has been enough provision for recapitalisation of PSU banks: Jaitley said they have anyway been allowed to bring down government holding to 52 percent, indicating that they could use this route to raise resources.