BUDGET - BMR Advisors

dams, bridges, ports etc. Such services are not liable to servicetax under the Finance Act. However, various input services usedare liable to service tax. As there is no output service tax liability,credit on inputs cannot be availed, thereby increasing the cost ofthe project.It is proposed that a proper refund / exemption mechanism beevolved in order to reduce the burden of taxes on infrastructureprojects.Exemption of dredging services to the portsDredging constitutes a substantial part of any port building /construction activity. While the construction services to theports are exempted by way of a notification, dredging servicesare not exempted, thereby increasing the cost of port buildingactivity.Therefore, to reduce the port development costs and to makethe transaction costs of their services competitive, it is expectedthat the Government exempts dredging services to the ports byan appropriate notification.Service tax on toll plazasCurrently, there are 100 services that attract service tax at therate of 12 percent plus 3 percent education cess. Though therate is expected to remain unchanged, new services areexpected to be brought under the service tax net including tollplazas on national highways to increase revenue base.Central Sales Tax (CST) / Value Added Tax(VAT)Reduction of VAT on cementThe current rate of VAT on cement is 12.5 percent. It is proposedthat VAT on cement be decreased to 4 percent, so as to align itwith other important construction materials like steel. This wouldreduce the high cement prices by at least Rs 20 per bag.This may be done by placing cement in the “declared goods”category in the Central Sales Tax Act, 1956.52indiaBUDGET2008