Dr. Sanjiv Agarwal

With Government thinking on the lines of having a negative list of taxable services on which there may be no levy of service tax in future, we have now a list of services which may become a base for the next budget or the new proposed tax . Presently, in India, there is a selective approach to tax services through a selective approach in which over 120 services are  included.

In order to enlarge the scope as also to clarify the issues of taxability and simplify classification of services, it is now being proposed that services provided by Government, regulatory bodies and Reserve Bank will not be taxed. Government would include union, state and local self government but not state owned corporations. It will also exclude services provided by UN, international bodies, diplomatic missions etc.

In order to promote and keep cheaper the public and social welfare services, services provided by non-profit entities such as NGO’s etc for social welfare activities excluding education or health, fund raising events and voluntary donations to charity may be kept out of tax net. Services in relation to funeral, burial, crematorium and mortuary will also not be taxed.

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While various financial services are already under tax net, it is proposed that certain transactions such as sale, purchase or acquisition of shares  and debt on principal to principal basis (not stock broking), interest, dividend and inter-bank forex transactions will be out of tax ambit . In fact, these transactions do not reflect any service but are outcome of an economic event or a transaction. However,  acquisition of shares in lieu of services will be taxed as it would be nothing but consideration for such services.

Animal husbandry  and agricultural services will continue to be out of service tax net including renting of vacant land for such purposes. This will also include poultry farming and dairy .

Commuters for local transport would be happy to know that it is proposed to excluded public transport buses,   metered taxies and three wheelers out of service tax net alongwith transport of goods out side India.

Construction services in relation to infrastructure projects including flood control water works, water  treatment plants, water supply pipelines , single dwelling units, homeless shelters, old, age homes, place of worship etc are also proposed to be excluded. This will bring much awaited clarity.

Hospitals and health care may also get some exemption but certain services are proposed to be taxed. It is proposed that preventive health check up within clinical establishment, cosmetic and plastic surgery may be taxed.

Other services which will not be taxed are religious services, representational services provided by advocates to individual, tolls etc.  Specified prizes or awards will also be in negative list. There will be no tax on betting or gambling but promotion of lottery etc will be taxed.

Thus, the proposed negative list, though spells a host of services, yet most of them are already out of tax net. The fall out of this negative list will be that all else will be taxed which may not be a desirable situation , though if may enhance tax revenue.

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