Service tax has now emerged as a significant contributor to tax revenue over the last 19 years. Even compared to 2007-08, its share as a percentage of gross tax revenue has increased more, compared with that in excise and customs. In 2007-08 the share of indirect tax revenue as a per cent of gross tax revenue was 47%, which is now 46.8% (BE) in 2012-13. Figures are taken from Economic Survey 2012-13. The share of customs revenue during this period has fallen from 17.6% to 17.3%. The share of excise has gone down from 20.8% to 18%. Service tax has gone up from 8.6% to 11.5%.

Thus, it appears that the loss in customs and excise revenue (particularly excise) has been made up by gain in service tax. In plain terms, it means that the tax from manufacturing has gone down relatively during this period. But it does not mean that the manufacturing sector is slowing down. The fact is that the collection rate has gone down. Read More