Advocates or law firms with an annual turnover up to Rs 10 lakh, and sale of companies will be exempted from service tax. These, along with 12 other services, figure in the new list of exemptions announced by the Finance Ministry.

The Finance Minister, Mr Pranab Mukherjee, announced the new list while releasing the Guidance Paper on the new approach to service tax. With this paper, the Government is all set to implement the new system for imposition of service tax based on the ‘negative list’ approach from July 1. All services, apart from those mentioned in the negative list and exemption list, will attract service tax at the rate of 12.36 per cent.

Under the new exemption list, service provided by advocates to other advocates and business entities up to a turnover of Rs10 lakh in the preceding financial year, will be exempt from the service tax. The same provision will be applicable for services provided by law firms.

It has also been said that if educational institutions provide auxiliary educational services and renting of immovable property, it will not attract service tax.

Releasing the new guidance paper, the Finance Minister assured that the new approach was not a revenue augmentation measure but intended to make compliance simple and administration of service tax law easier.

He also hoped that the new effort should reduce the chances of litigation and minimise the possible areas of conflict between the revenue and the tax payers.

The Central Board of Excise and Custom said that the release of the Guidance Paper on the new approach marks the end of the ‘positive list’-based selective approach to taxation of services, which is in vogue since 1994. The Paper has become necessary to explain the changes which have been brought about as a result of the new approach.

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