Toilets, 37 other services exempted from service tax

Advocates serving entities with turnover of up to Rs 10 lakh, libraries and entities providing public conveniences are among the 38 services which will not have to pay 12 percent tax under the new norms slated to come into effect from July 1.

As per the guidance note on implementation of the negative list of service tax released by Finance Minister Pranab Mukherjee, the entities providing merger and acquisition services, too, will be kept out of the ambit of the tax net.

With the inclusion of 14 more services in the negative list, the total number of exempt services would go up to 38. “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)”, Mukherjee said while releasing the 107-page book ‘Taxation of service: An Education Guide’.

With the introduction of the negative list, all services which services which do not figure in the list would be subejct to 12 percent tax. Mukherjee said 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”.

The government has collected Rs 97,000 crore on account of service tax in the last financial year. For the current year, the government has hiked the service tax rate by two percent to 12 percent. As per the service tax guide, the 14 services which will be exempted from payment of tax include lending of books, publications or any other knowledge enhancing content or material by public libraries.

According to chartered accountant and service tax expert Atul Gupta, under the proposed norms entities providing merger and acquisition services will not be subject to service tax. 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. It said services provided by way of public convenience such as provision of facilities of bathroom, washroom, urinals or toilets would be included in the list.

The other services which would be exempted from tax include, auxiliary educational services and renting of immovable property provided 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 into the negative list.

The government has widened the definition of ‘Services’ to bring in more activities under the tax net. At present, 119 services that come under ‘positive list’ are levied. As per the negative list, services like 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 kept in the

negative list.

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.

Travel in first class and in air-conditioned rail coaches, too, will attract service tax. The services sector account for about 60 percent of the country’s Gross Domestic Product.

PTI