Negative List of Services under Service Tax

CA Surbhi Nahata

Earlier with old scheme only some specified services were taxed, but now with the new scheme all the services except negative list of services are taxed. Negative list of services is altogether a new concept put forward in Budget 2012 wherein the services covered in this list is out of the ambit of chargeability of service tax. In all there are 17 heads of services that are covered in this list.

So let’s get started!

1. Services by government or a local authority:

All the services provided by government (Central government, State government and Union territory) or a local authority(a panchayat, a municipality, a municipal committee, a district board, a military station, a regional council or a district council, a development board) are outside the scope of service tax, therefore, no chargeability on such services. However, there are certain exceptions to this rule:

a. Services provided by department of post: Department of post is a Central Government department. Services like speed post, express parcel post, life insurance and agency services are liable to service tax if provided to a person other than government. So, if these services are provided to Government only then no service tax. All other services provided by department of post like post card, inland letter service etc are covered in negative list and hence no service tax.

b. Services in relation to an aircraft or a vessel:These services provided whether inside or outside the boundary of a port or an airport are liable to service tax for example providing parking service.

c. Transport of goods or passenger: like Delhi tourism are liable to service tax.

d. Support or auxillary services: Like testing and analysis, advertisement servicesetc provided by government to anybusiness entity is taxable. The term business entity does not include an individual.

2. Services by the Reserve Bank of India:

All the services provided by RBI is covered under the negative list and hence not taxable. However,services provided to RBI like technical consultancy services are liable to service tax.

3. Services by a Foreign Diplomatic Mission located in India:

Services provided by foreign diplomats are covered in negative list and hence not taxable. However, services provided to foreign diplomats are not covered in negative list, but such services are covered in exemption notification where certain services are specifically exempted(Note: The details of exemption notification will be shared in my coming articles), hence no service tax on that also.

4. Services relating to agriculture or agricultural produce:

All the services relating to agriculture so long as such operations which do not alter the essential characteristics of agricultural produce are covered in negative list and not liable to service tax. Therefore, agricultural operations directly related to production of any agricultural produce like cultivation, harvesting, threshing, plant protection or seed testing are covered in negative list. Other services like:

a) Supply of farm labour.

b) renting/leasing of agro machinery or vacant land with or without structure incidental to its use.

c) loading/unloading, packing, storage, or warehousing of agricultural produce.

d) Processes carried out at an agricultural farm like tending, cutting etc.

e) Agricultural extension services.

f) Services by any agricultural produce marketing committee or board or services provided by a commission agent for sale or purchase of agricultural produce are also covered in negative list.

Kindly note that the term ‘agricultural produce’ does not include sugar, edible oil, processed foods, processed tobacco.

5. Trading of goods:

Trading of goods means buying/selling of goods and note that buying, selling of goods are subject to VAT/CST and hence no service tax on the same.However, any auxillary services provided     with respect to trading of goods is liable to service tax for example: services provided by commission agent.

6. Any process amounting to manufacture/production of goods:

Any process amounting to manufacture are liable to excise duty hence no service tax. Here the word manufacture plays a vital role i.e. if any process does not amount to manufacture, then it will be liable to service tax.

7.Selling of space or time slots for advertisement:

For example advertisement in or in relation to bill boards, public places, building, conveyances etc. However, note that sale of space for advertisement in only print media is covered i.e. advertisement in radio/television/canvassing are not covered in negative list. Also note that auxillary services like preparation/making of advertisement are outside the ambit of negative list and will be liable to service tax.

8. Services by way of access to a road/bridge by way of toll charges:

Only State government has the power to levy toll tax, and since service tax is a central government tax so CG has no power to levy taxon toll charges, therefore, covered in negative list. However, auxillary service like services of collection agencies is liable to service tax.

9.Betting, gambling or lottery:

Like toll tax, only SG has the power to levy tax on betting/gambling/lottery, so no service tax on these types of services. However again, auxiliary services are taxed like organizing a betting/gambling event.

10.Admission to entertainment event or to amusement facilities:

for example: cultural programmes, drama, or ballet in open garden, standalone ride in mall. Since it also a SG tax (entertainment tax) so no service tax on it. However, note that membership of club is neither entertainment event nor an amusement facility, so liable to service tax. Also note that auxiliary services like event manager organizing an entertainment event are not covered in negative list and hence liable to service tax.

11. Transmission or distribution of electricity by an electricity transmission or distribution utility:

Service provided by only electricity transmission/distribution of utility is covered under negative list which would include:

a) Central electricity authority.

b) State electricity board.

c) Central transmission unit.

d) State transmission unit.

e) A distribution/transmission license-licensed under Electricity Act,2003.

f) Any other entity entrusted with such function by the Central/State government. So, services provided by private contractors are not included in negative list.

12. Services in the field of education including:

a) pre-school education and education up to higher secondary or equivalent(i.e. class 12).

b) education as a part of curriculum for obtaining a qualification recognized by law like IIT, IIM, ICAI etc (Note that only qualification recognized by Indian law is considered , not under foreign law)

c) education as a part of approved vocational education course.( note that approved vocational course include courses affiliated by National council of vocational training and National Skill Development Corporation)

However, any auxiliary service remains liable to service tax.

13. Services by way of renting of residential place for use as residence:

The term ‘residential place’ means permanent accommodation and does not include hotel, motel, inn, house boat or such other places meant for temporary stay. Note that residential place should not be used for commercial purpose or partly for residential and partly for commercial use.

14. a) Service by way of extending deposits, loans or advances :If the consideration is represented by way of interest/discount, then it is covered under negative list. Loan processing charges/file charges are not covered under negative list.

b) Service by way of foreign exchange translation: If the deal is between bank to bank, bank to authorized dealer or vice versa and authorized dealer to dealer, then no service tax. Note that transaction between bank and general public, or other parties are not covered in negative list.

15.Service of transportation of passengers with or without accompanied baggage:

Such transportation will include a stage carrier, metro/monorail/tramways, inland waterways, metered cabs/radio taxis/auto rickshaw, railways (other than first class and an air conditioned coach) and public transport in a vessel between places in India( except transport which is mainly for tourism purpose).

Therefore, services provided by way of rail first class AC will be liable to service tax. Similarly any special bus (charter) from Delhi to Faridabad or a tourist bus, tourist cab will be liable to service tax.

16. Service by way of transportation of goods:

Services provided by only 3 sources are covered here:

a. By road –except goods transport agency and courier agency.

b. By vessel/aircraft – from outside India to Indian Customs port/airport.

c. By Inland waterways.

17. Services provided with regard to funeral, burial, crematorium, or mortuary including transportation of the decreased.