The shift to a negative list regime — from an arbitrary list now — is expected to bolster tax revenues significantly.
The revised draft ‘negative list’ of services that won’t be taxed by the Centre will see fresh additions and deletions before it becomes part of the Budget for the next fiscal, according to sources close to the development.
Currently, 124 services are taxed at 10.3%.
The shift to a negative list regime — from an arbitrary list now — is expected to bolster tax revenues significantly with many new services categories expected to figure in it.
Service tax was budgeted to generate Rs82,000 crore this fiscal or 10.38% of total revenue receipts expected by the Centre.
Services that may not feature in the negative list include construction and work contract, port or airport services, renting of immovable property or right to enter or use an immovable property, security, trade fairs and exhibitions, transport of goods and passengers and warehousing.
Also likely to be excluded are betting and gambling, except services in relation to promoting, marketing or organising of games of chance, including lottery services, and advertisements. And lawyers currently pay service tax for their advisory role — and not for their representational role. If not in the current Budget, service tax will be imposed for their latter role subsequently, sources said.
Industry, however, feels that two more items need to be included in the negative list of service tax: exports, and revenues or cost-sharing.
World over, service tax is not imposed on exports. However, in India, exports are zero-rated, which allows availing of input credit (whatever tax is paid on inputs will be available as credits or through refunds).
And on revenues or cost-sharing, since there is no underlying services rendered, there is no tax.
This needs some clarity, experts said.
The services that will feature in the list includes social welfare, public utilities, transport, education, health and real estate (including repair or renovation of infrastructure and single dwelling unit).
The negative list is an effort towards implementation of a goods and service tax (GST) regime in the country.
All services that aren’t part of the negative list will automatically come under the ambit of GST.
Experts said it makes sense to have a uniform list of services which can be taxed because GST revenues will be split between the Centre and the states.
Once GST comes into effect, it will replace a host of indirect taxes such as central excise duty and value-added tax, octroi and purchase tax with a single levy.
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