For the common man, already burdened by rising prices, changes in the service tax regime will bring in more gloom. The government is rolling out a new service tax regime from today, which is based on the negative list concept.
The Finance Ministry has kept 38 services under the negative list which will be exempt from taxation; all the other services will attract 12 per cent service tax. The government had earlier decided to implement the negative list from July 1.
The government has widened the definition of 'Services' to bring in more activities under the tax net. Till now, 119 services that come under 'positive list' are subject to the levy.
The new approach to taxation of services is intended to take the country and the economy a step closer towards the introduction of Goods and Service Tax (GST).
As per the negative list, services like metered taxis, autorickshaws, betting, gambling, lottery, entry to amusement parks, transport of goods or passengers and electricity transmission or distribution by discoms will not come under the service tax net.
Other important services which will not attract the tax include funeral, burial, mutate services and transport of deceased.
Coaching classes and training institutions will come under the net, though the tax will not be levied on school, university education and approved vocational courses.
However, confusion prevails with regard to the imposition of service tax on rail freight and passenger fares.
Railway Minister Mukul Roy has said the Railways will not introduce service tax on freight and fare from July 1 and has written to Prime Minister Manmohan Singh, who is now looking after the Finance portfolio, in this regard.
Besides, services provided to the government, local authorities or a government authority for the repair and maintenance of an aircraft would also come in the negative list.
Also, services provided by advocates to other advocates and business entities up to a turnover of Rs. 10 lakh in the preceding financial year is exempt from service tax.
Services provided by way of public convenience such as provision of facilities of bathroom, washroom, urinals or toilets would be included in the negative list.
The other services which would be exempted from tax include auxiliary educational services and renting of immovable property by educational institutions in respect of education exempt from service tax.
Besides, services relating to works contract to a scheme under JNNURM or Rajiv Awas Yojana would also come under the negative list.
The Finance Ministry has set a target of Rs. 1.24 lakh crore for service tax collection in the current fiscal, higher than Rs. 97,000 crore collected in 2011-12.