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You may soon need to pay service tax on railway fares as well as on capitation fees or donations to schools or colleges.
These services are not among those placed in the concept paper on negative list of services. The government released the paper on Monday.
At present, 117 services are taxed at the rate of 10.3 per cent. The government collected over Rs 70,000 crore through service tax during 2011-12. It aims to get Rs 82,000 crore during the current fiscal.
The paper says, “Many new services are likely to come into tax net as a result of transition towards negative list.” The concept paper places 27 groups of services in the negative list. People can comment on the concept paper by September 30, 2011.
A negative list of services implies two things — a list of services that will not be subject to service tax and that all services other than those mentioned in the negative list will become taxable.
The Finance Minister, Mr Pranab Mukherjee, proposed the concept of negative list in this year's Budget. The negative list is formulated keeping in view a variety of considerations, such as administrative, contractual obligation, difficulties to tax certain activities and the constitutional limit.
Towards GST
A senior Finance Ministry official refused to give a timeline for when the negative list will become operational. The concept paper is to help finalise the approach towards the Goods and Services Tax (GST).
It is believed that if the GST rollout does not take place from April 1, 2012, then the impact of this negative list could be seen in the general Budget for 2012-13.
Explaining the concept of the negative list, the official said that, at present, some of the services get exemption, and if they are not in the negative list, they may continue to be out of the tax net. “However, if you have too many exemptions, then you can't have good GST system,” he added.
The paper has defined services as “Anything that does not constitute supply of goods, money or moveable property.” The paper believes that after the implementation of negative list, approximately 25 percentage of the total value of services, that is roughly Rs 12.5 lakh crore, could be brought under the service tax net.
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