"Fifty-five per cent of the GDP is contributed by services sector, which is a growing sector that must contribute its legitimate share to the exchequer," Finance Minister P Chidambaram said while presenting the General Budget for 2008-09 in Parliament.
Besides, right to use goods, in cases where VAT is not payable, would also come under the service tax net. In a bid to provide relief to small services providers, the Finance Minister also proposed to increase the threshold limit of tax exemption from the existing level of Rs 8 lakh to Rs 10 lakh.
"As a result, about 65,000 small services providers will go out of the tax net," Chidambaram said. He also clarified that money changers, persons running games of chance and tour operators using contract carriage vehicles are liable to pay Service Tax, although it is widely believed that need not.