Expanding the scope of the tax to include not just spectrum but all auctions, right of way, licence fees and development rights, Indian companies will have to pay service tax on any service they avail from the government or local authority from the next fiscal year. This is in line with the proposed goods and services tax (GST) wherein everything is taxed.
The government has notified a provision of the last Budget that will kick in on April 1. According to the Budget all the services provided by the government or local authority to a business entity, except the services that are specifically exempted, or covered by any other entry in the negative list, shall be liable to service tax. These will all attract service tax, now applied at 15%, inclusive of two cesses. Under the negative list system, all services are taxed unless specifically mentioned in the list.
The Finance Act, 2015, has made an enabling provision to exclude all services provided by the government or local authorities to a business entity from the negative list. The provision, however, does not cover government services provided to individuals.