"We have set a target of INR1,24,000 crore from service tax for the current financial year. I am hopeful that the new reforms will help us exceed the target significantly," Mukherjee said after releasing a 'Guidance Paper' on the new approach to service tax.
Collections from service tax increased by 37 percent to over INR97,000 crore in the financial year ended March 31, 2012.
Service tax has become an important source of revenue for the government since it was introduced in 1994. In its first year - 1994-95 - the collection was a mere INR400 crore.
The Finance Minister said that the government was moving towards an entirely new system of service tax system based on a 'negative list'.
Under the new system, all services will be liable to taxation except those indicated in the negative list or otherwise exempted.
More than a revenue-garnering measure, the negative list is expected to make the administration of the tax simple, both for the tax authorities as well as the taxpayers, Mukherjee said.
He said that the new system would reduce litigation and usher in a regime much closer to the Goods and Services Tax (GST).
The release of the Guidance Paper marks the culmination of the year-long efforts made by the government to introduce a negative list-based comprehensive approach to taxation of services as a part of the budget exercise.
"The Guidance Paper attempts to anticipate and answer almost all the questions that may arise in the minds of an ordinary taxpayer in the wake of implementation of the new approach," the Finance Ministry said in a statement.