People's Democracy

Withdraw Service Tax On Postal Services

The following is the text of the letter written by CPI(M) Polit Bureau member Sitaram Yechury to prime minister Dr Manmohan Singh on June 22, 2006 with regard to the central government decision to levy service tax on postal services.

I AM writing to you expressing concern at the recent decision of the central government to levy service tax on postal services. According to my information, this has already been implemented on all types of postal services including money orders, postal life insurance, speed post etc. Currently a 12 per cent service tax and an additional 2 per cent education cess are being levied on these services, i.e., at the rate of 12.24 per cent.

You are surely aware that crores of families in India are surviving on remittances sent by their working children through money orders. This is particularly so with defence personnel. These are lower middle class families who even otherwise are struggling to make both ends meet. Such an imposition of service tax on postal services will further burden vast sections of the common Indian.

You are also aware that the CPI(M) has all along articulated the need to widen the tax base. Such a widening, however, does not mean imposing greater burdens on the economically weaker sections of our society. Widening of the tax base should target those who can afford to part with their incomes and wealth rather than targeting the poor.

I urge you to look into the matter and withdraw these fresh burdens that are being imposed on the people.

CITU OPPOSES

The CITU secretariat issued the following statement on June 21, 2006:

The Central Board of Excise and Customs had ruled that some of the services of the Department of Posts are liable for service tax and initiated steps to have all Head Post Masters registered with the Commissioner of Service Tax of the respective jurisdiction. Consequently the Department of Posts had issued instructions for recovering tax at the rate of 12.24 per cent (12 per cent service tax and 2 per cent education cess thereon) on several of the postal services. The move is to bring postal services availed by common people like all types of money orders, Postal Life Insurance, Speed Post etc. under the service tax regime. 

The CITU opposes this move on the part of the finance ministry to impose further burdens on the common man by imposing tax on the postal services. The finance ministry exercise of mobilising revenue is highly skewed with attempts to fleece the poor and common man and heaping concessions and incentives on the corporates, MNCs and rich and affluent sections of the society. During successive pre-budget consultation meetings, the CITU had placed practical proposals for widening the tax net by imposing taxes on those who can afford to pay in view of enormous income and profit amassed by them. Instead of taking measures in this direction, the finance ministry is zealously pursuing a policy of widening the tax net at the base by targeting the low-end regular income earners and those sections of the public who do not have adequate purchasing power. 

The CITU demands of the UPA government to rescind the move to subject postal services to service tax and exempt the services rendered by the Department of Posts from the purview of the service tax.