Role of service sector in Indian economy and its contribution in taxation

The services sector has emerged as the fastest growing sector of the economy. Services sector is called the tertiary sector. It has become wider. Services sector includes - Trade, hotels, restaurants, Transport, storage, communication, Financing, Insurance, Real Estate and Business Services, Community, Social and Personal services etc. The new economic policy of 1991 was the turning point of Indian Economy. A lot of changes in the economy have been occurring due to the adoption of The New Economic Policy especially in the services sector. The current situation in India is that the growth rate of services has overtaken both agriculture and industry and is now more than 50 per cent of GDP. The present study to analysis the relationship between growth rate of service sector and growth rate of service tax in total revenue tax. To achieve the objectives of the study secondary data has been collected from the various published sources like: Economic Surveys, RBI Bulletins, websites of Government of India and Central Board of Excise and Customs, Online Data, Journals, Articles, Newspapers etc. This paper indicates that the growth rate of most of the services has remained positive Yet, Service tax has not contributed enough to the total tax basket of India.