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14 more services come under tax-exempt negative list
June, 25th 2012

The government, on Wednesday, included 14 more services in the Negative list to exempt them from the payment of service tax under the new dispensation that is slated to come into effect from July 1.

Among the new services that would now be exempted from the negative list-based system of tax on services are advocates providing services to entities with a turnover of up to Rs.10 lakh, companies engaged in construction of metro projects, law firms, and entities providing public conveniences.

With the inclusion of these 14 services, the total number of tax-exempted services in the negative list goes up to 38. In effect, all other services which do not figure in the exempted category list would be taxed at the rate of 12 per cent.

Guidance paper

Releasing a 107-page guidance paper titled Taxation of service: an education guide to mark the new approach to service tax at a function at his North Block office here, Finance Minister Pranab Mukherjee expressed confidence that 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.

Having mopped up Rs.97,000 crore by way of service tax during 2011-12, the government has sought to switch over to the negative list based approach to taxation and has set a much higher collection target for the current fiscal in view of the extended tax base and the increase in the indirect tax levy from 10 per cent to 12 per cent. According to the guidance manual, among the 14 services that have been added to the negative list and, thus, exempted from payment of tax are lending of books, publications or any other knowledge enhancing content or material by public libraries. Also, services provided to the government, local authorities or a government authority for repair and maintenance of an aircraft would also not come under the ambit of service tax.

Apart from the services provided by advocates to other advocates and business entities up to a turnover of Rs.10 lakh in the preceding fiscal being exempted from tax, other services which would be tax-free are auxiliary educational services and renting of immoveable property provided by educational institutions in respect of education. Alongside, services relating to works contract to schemes under JNNURM or Rajiv Awas Yojana have also been included in the negative list and exempted from tax.

Hitherto, a total of 119 services on the basis of a Positive list were liable to service tax. To widen the tax base in keeping with the extension of services, the government widened the definition of 'Services' to bring in more activities under the tax net on the basis of a negative list.

In effect, barring the 38 exempted services in the negative list, all other services will come under tax from July 1.

As per the negative list, services such as metered taxis, auto rickshaws, betting, gambling, lottery, entry to amusement parks, transport of goods or passengers and electricity transmission or distribution by discoms have been exempt from services tax. Other important services which will not attract the levy include funeral, burial, mutate services and transport of deceased.

On the other hand, services such as coaching classes and training institutions will come under the tax net, though it will not be levied on school, university education and approved vocational courses, Travel in first class and in air-conditioned rail coaches, too, will attract service tax.

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