The tax, which is now keeping the legal practitioners most busy is the service tax. The reason is the lack of clarity about what is taxable and the problem in reading the law and the notifications in getting a consistent interpretation.

Even for the people with a sufficiently wide background in the interpretation of fiscal laws, it takes an enormously long time to get at the correct intention. A certain magazine has given the list of case laws on service tax at 341, circulars at 197 and notifications at 151.

This being a new tax, some of it was possibly inevitable but now the time has come for consolidation and simplification, for which my suggestions have been discussed below:

Need for a self-contained Act:

When the service tax was introduced in the 1994-95 Budget, the thinking was that a beginning had to be made immediately in respect of service tax and therefore, there was no time to sponsor a new Act and steer it through Parliament, which would take quite long.

So the service tax was introduced as part of the Finance Act. To begin with there were just a few taxes and so the system of writing the definitions of the services and those of the taxable services continued in different Sections.

But now that in the course of nearly 12 years, more than 70 taxes have come into being, it has become extremely difficult to match the definitions of the taxes with the definitions of the taxable services.

There are also overlapping cases such as civil engineering and repair of computer software. And the exemptions are also not all available at one place. Now, therefore, in the Budget next year, the government should introduce a Service Tax Act that should write the charging section and the machinery section in the main body of the law and the tariff in a separate schedule as part of the Act.

The tariff schedule should contain the basic definitions of the taxable services by combining the two present definitions of the "meanings" of services and the definitions of the taxable services.

For example, the construction of complexes has been defined in Section 65(30a) of Chapter V of the Finance Act, 1994, and the corresponding taxable service has been defined in Section 65(105). They should be written in the tariffs after combining them and after taking care to see that there is no overlapping.

The tariffs can now have new item numbers, which will take some time for people to adjust with, but it is worth the exercise from the long-term point of view. It should also contain the exemptions in a separate chart.

At present they are in different notifications, which is very difficult to locate since one has to go through 151 notifications to find out an exemption. The tariffs should be made in the central excise pattern.

The advance ruling system needs to be extended:

Currently the system of giving advance ruling for service tax is restricted (just like in the case of central excise and customs) to non-residents and joint ventures with non-residents and residents. This restriction should be abolished and it should be made open to all Indians.

The infrastructure is much more adequate than the present workload. Not even half a dozen cases on services taxes are said to have been received so far by the Advance Tax Authority. The Indians deserve as much facilitation as the non-residents.

The scope of advance tax ruling is now restricted only to classification, valuation, applicability of notification, and admissibility of credits. The basic issue as to whether a service is taxable or not is out of the purview of the Authority. For example, the Authority will not give a ruling on whether a telephone information service will fall under business auxiliary services or not.

The scope is also limited to "service proposed to be provided". This does not cover cases of those who have already started providing a service. It should be extended to those who have started providing the services but have not got into litigation so far. In such a situation it will not turn out to be a parallel organisation to the present system of adjudication, appeal, etc.

The idea is to help the people in general in getting clarification as to who is harassing them by making them run from pillar to post and getting no clarification on the mere grounds that somewhere somebody has received a showcause memo and so it is subjudice. It is as good as throwing them to wolves.

Exemptions to be restructured:

Exemption to refer to a specific service tax: Some exemptions such as Notification No. 8/2003-S.T., dated 20-6-2003 in relation to call centre or medical transcription centre, have been issued without reference to any tariff heading such as Section 65(19), etc. This makes it difficult for any service provider to claim the exemption without reference to the main service heading. In customs and central excise the exemptions carry the tariff heading under which they are issued except general items such as charitable gifts. The same pattern should be followed here.

In the proposed tariff under the proposed Service Tax Act all the exemptions should be combined and placed in one chart, as is the practice in central excise and customs.

Existing Court judgements to be accommodated in the new Act: There are a large number of high court and Supreme Court judgements on various service taxes and some are adverse to the point of view of Revenue. It is not clear whether Revenue has accepted them or not.

When the new Service Tax Act is made, it will be advisable to accommodate the judgements by modifying the language of the definitions of the tax to bring harmony so that the future of service tax is smoother.

The rate of service tax should also be increased to 16 per cent to make it equal to the CENVAT rate, at the same time making inter-goods and service credit more fluid and all-pervading so that the goods and services tax at the central level can be a reality.