Govt includes 14 more services under tax exempt negative list

Government has included 14 more services in the ‘Negative list’, exempted from the payment of service tax under the new norms. With the addition of 14 more services in the negative list, the total number of exempt services, which is not subject to 12% tax, would go up to 38. Barring the 38 exempted services in the negative list; all other services will come under tax regime from July 1, 2012.

According to the guidance note on implementation of the negative list of service tax released by Finance Minister Pranab Mukherjee, the new services, which would now be excused from the negative list-based system of tax on services, are advocates serving entities with turnover of up to Rs 10 lakh, libraries, entities providing public conveniences such as provision of facilities of bathroom, washroom, urinals or toilets, companies engaged in construction of metro projects, and law firms.

Moreover, entities providing merger and acquisition services, services relating to works contract to a scheme under JNNURM or Rajiv Awas Yojana, auxiliary educational services and renting of immovable property provided by educational institutions in respect of education, too, will be kept out of the realm of the tax net.

While releasing the 107-page book 'Taxation of service: An Education Guide', Mukherjee said, the new approach to taxation of services is proposed to take the country and the economy a step closer towards the introduction of Goods and Service Tax (GST). By adding further he said, ‘with the expansion of the service tax base, it would be possible for 'the Central Board of Excise and Customs (CBEC) to exceed the collection target of Rs 1.24 lakh crore in the current fiscal.’

In the last fiscal, the government has collected Rs 97,000 crore on account of service tax and with the switch-over to the negative list-based approach to taxation; it has set a higher collection target for the current financial year and also increased the indirect tax levy from 10% to 12%.

Services sector account for about 60% of the country’s GDP. Currently, 119 services that come under 'positive list' are levied. The government, with a view to bring in more activities under the tax net, has widened the definition of 'Services' on the basis of a negative list.