The Internet and Mobile Association of India (IAMAI), a non-profit body of internet and mobile value-added services players, has asked the finance ministry for a five-year moratorium on payment of service tax.
In a pre-Budget memorandum to the ministry, the IAMAI has said the Internet is at a nascent stage in India and the imposition of service tax on Internet advertisements is hampering the growth of the industry.
It has also asked for a waiver of service tax on transactions done through credit cards, debits cards and net banking.
When inter-change rate is added to the new service tax rate, the cost of products and services sold online becomes significantly higher than those sold offline. This seriously harms the nascent e-commerce industry in our country, the IAMAI said.
The online transaction market is around Rs 3,000 crore, growing at 100 per cent year on year, according to the body.
The IAMAI has demanded that mobile value-added services companies be given exemption from service tax, since there is no revenue loss to exchequer, as on end-user price the government is being paid a service tax by the telecom operators who are billing the customers for such services.
Levying service tax on these players would amount to duplication of efforts, it added.
The body also asked the central government to direct all state governments not to impose entertainment tax on Internet and broadband services.
Internet users in the country are set to grow to 42 million by March next year and the number of mobile value-added service users is 15 per cent of the total mobile.
In the first half of 2006, the industry has seen an investment of $75 million from venture capital firms.