<h1>Service tax rationalization: penal relief for compliant taxpayers and clarification of CENVAT credit rules proposed.</h1> Proposals aim to rationalise service tax by restructuring penal provisions to favour assessees who maintain truthful records while targeting deliberate evaders, by clarifying the scope of inputs and input services, and by streamlining allocation of CENVAT credit between exempt and taxable supplies; a public consultation on taxing services via a small negative list will inform the approach to GST.