Health, education to be out of service tax net

Services, which are provided by the government as well as the private sector, would attract 10 per cent tax, Central Board of Excise and Customs (CBEC) Chairman S K Goel said while releasing the revised concept paper on ‘Taxation of Service based on Negative List’.

The 10 services which are provided by the government and the private sector companies include insurance, security, port and airport. As per the revised discussion paper, Goel said, 22 services will be under the negative list as against 27 proposed in the earlier draft.

On implementation of the proposal, Goel said, “The negative list of services should be implemented immediately or we should wait... it is a matter of debate.” The negative list will include services like funeral, burial and mortuary agencies, interest paid on deposits by bank, services provided by independent journalists, dividend on investments, and transport of passenger in public transport.

The other services which figure in the negative list are copyright, dramatic and artistic work, services provided by recognised political parties, advertisement other than those published in newspaper and broadcast by radio or TV or displayed in other electronic media. Services account for nearly 63 per cent of India’s GDP and widening of the net could yield an additional 20 per cent in service tax. The government proposes to collect Rs 82,000 crore from service tax during 2011-12. During the April-October period, the government’s service tax mop-up stood at Rs 50,809 crore. At present, the Centre imposes 10 per cent tax on 119 services. The CBEC has invited feedback, views and suggestions by December 15 on the revised concept paper.

“There has been some change in the way we define economic activities like hobbies, awards, religious activities among others. Hence we have reduced the list,” Goel said.
At present, only a limited number of services come under the tax net. By way of a  new negative list, the government proposes to tax most of the services by making the new list effective. The new list, however, excludes all those services, like insurance, postal services other than post card, money orders, inland letters, where the government is competing with the private sector. Further services like business promotion or business support services, construction, trade fair, port or airport services and warehousing will not be in the negative list.

“Health fitness services like weight loss, speedpost, security services provided by government agencies like CISF will continue to attract the levy,” Goel said. The services which would continue to be taxed include placement fees, non-recognised institutes, he added.

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