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Budget 2019-20: Service sector gets a massive boost

  • Highlights

  • Small service providers can opt for composition scheme

  • GST rate cut for small service providers to 6%

  • Cinemagoers will now have to pay just 12% tax

  • A push to the IT sector with formation of an AI institute

The services sector accounts for nearly two-thirds of India’s gross domestic product. Small businesses create employment in large numbers. The budget offers significant support.

Here’s what the budget has to offer:

1. Small Service Providers:

The interim budget has proposed that small service providers with a turnover up to Rs 50 lakhs can now opt for composition scheme and pay GST at 6% instead of 18%. Earlier, small service providers like restaurants had to pay 5% tax. Many small traders, manufacturers and service providers will benefit from these trader friendly measures.

- What is Composition scheme?
The composition scheme is an attractive scheme, wherein small services providers have to pay only 1% flat rate and have to file only one annual return.

This reduction in taxes is given by the government to encourage SMEs in the services sector. With reduced taxes, there will be small entrepreneurs will be able to develop and expand their businesses.

2. Entertainment Industry:

The Interim Budget has brought some good news for the SMEs in the entertainment industry. Cinemagoers who were subject to multiple taxes up to 50% will now have to pay just 12% tax. Also, to boost the entertainment industry, the interim budget has announced a single window clearance mechanism for Indian film-makers. The government recognizes the role of the entertainment industry in terms of employment generation.

Therefore, the interim budget 2018 is an ‘SME friendly’ budget. It has opened new doors for expansion and innovation for the SMSs and also given relaxation in terms of taxes. This has paved the way for further services-led growth in the Indian economy.

3. IT Services:

In recent years, the advancement in the field of artificial intelligence (AI) has led to a world-wide race for data. To help Indian IT industries lead in the AI race, the formation of the National Institute for Artificial Intelligence (NIAI) is proposed. This institute will conduct various programs on artificial intelligence. A push to this segment in the IT services category is expected to create a lot of jobs. The government wants India to be a hub for artificial intelligence related startups.

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