Service tax on new services like ATM operations, maintenance and management, share transfer agents, sale of space or time (other than print media), sponsorship of events (other than sports events), and ship management announced in the Budget this year is likely to be effective from May 1.

Officials said the revenue department was finalising the relevant rules for the new services. At present there are 81 services that attract service tax. The service tax rate has already been revised to 12 per cent with effect from April 18, 2006, following Presidential assent.

However, the revenue department is yet to revise the rules governing payment of service tax by air travel agents, which is linked to the rate of service tax. Rule 6(7) of the Service Tax Rules, 1994, gives an option to pay service tax in relation to the services provided by air travel agents at the rate of 0.05 per cent and 1 per cent on the basic fare for domestic or international bookings, respectively.

According to service tax expert J K Mittal, this appears to be an unintended omission by the department and is expected to be corrected soon. Mittal pointed out that going by the rule book, the rate prescribed under Rule 6(7) needed to be revised upward by 20 per cent.

Therefore, the new rates should be 0.06 per cent and 1.2 per cent, respectively in place of 0.05 per cent and 1 per cent on the basic fare for domestic or international bookings, respectively.

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