The contribution of service tax to the country's GDP is quite low at 1.1 per cent and the government expects to get more revenue from this sector in future, a top official said.

Contribution of the service sector in the GDP is 56 per cent but the share of the service tax in the GDP is just 1.1 per cent, Chairman of Central Board of Excise and Customes P C Jha said in a interaction meeting organised bythe Bangalore Chamber of Industry and Commerce on Friday night.

"So, it's quite low, in future, this ratio has to go up. Service sector is one from which the Government expects to getmore revenue in future", he said.

Jha said the service tax revenue is growing at a rapid pace, in 1994, service tax was imposed on three services and the rate of duty then was five per cent, with service tax revenue at Rs 410 crore (Rs 4.1 billion) with 3,900 service tax payers.

Now, 106 services come under tax and the rate of tax has gone up to 12.36 per cent.

The number of service tax players in the country now has gone up to 5.5 lakh and the service tax collection in 2007-08 was 51,113 crore (Rs 511.13 billion).

In spite of this rapid growth, the contribution of service tax to the GDP is only 1.1 per cent while the service sector's share in GDP is 56 per cent, he said.

For the current financial year (2008-09), the target for collection of service tax is Rs 64,460 crore (Rs 644.6 billion), he said, adding, the Department's expectation is that it would be exceeded.

Speaking on indirect tax (customs, central excise and service tax) collection, Jha expressed hope that despite the post-budget reductions in rates including those pertaining to diesel and zero rate of customs import duty on crude, the target of Rs 3,20,000 crore or Rs 3,200 billion (14.1 per cent higher than the collection of last year) would be met.

"The total impact of that (the post-budget reductions) is about minus Rs 20,000 crore (Rs 200 billion).

"But in spite of that we are hopeful that with additional revenue on service tax, (and) some policy factors which have come, the target of Rs 3,20,000 crore (Rs 3,200 billion) will be able to achieve", Jha said.

According to him, the contribution of indirect taxes in the total tax revenue was 47.5 per cent in 2007-08 (coming down from a level of 58 per cent in 2004-05) and it's projected to decline to 46.5 per cent in the current financial year.

Jha said the large tax payer units are now functional in Bangalore, Chennai, Mumbai and Delhi, and the fifth one would be opened in Kolkata, expected by year-end.

After that, the Department would look at the possibility of extending it (opening LTUs) to other places also, he added.