Negative List of Service Tax
In the Existing List, only the services specified in clause (105) of section 65 of the Finance Act, 1994 are taxed under the charging section 66.In the new system, all services, other than services specified in the negative list, provided or agreed to be provided in the taxable territory by a person to another would be taxed under section 66B. (The Effective date notified as for applicability of Negative List is 01.07.2012)
Firstly the Big Question is –
What is Service?
Service has been defined in clause (44) of the new section 65B and means-
a. Any activity
b. For consideration
c. Carried out by a person for another
d. And includes a declared services
The said definition further provides that “Service” does not include-
Any activity that constitutes only a transfer in title of- Goods or
Immovable property by way of sale, gift or in any other manner
A transaction only in –
Any service provided by an employee to an employer in the course of an employment
Fees payable to a court or a tribunal set up under a law for the time being in force
What does the word ‘Activity’ signifies?
‘Activity’ has not been defined in the act. In terms of the common understanding of the word activity would include an act done, a work done, an operation carried out, execution of an act, provision of a facility etc. It is a term with a very wide connotation.
What does the word ‘Consideration’ means?
The phrase ‘consideration’ has not been defined in the act .The definition of ‘consideration’ as given in the Indian Contract Act, 1872 can safely be adopted to understand the concept of consideration .When so applied to the Act, ‘consideration’ for a service provider or agreed to be provided by service provider would mean anything which the service receiver or any other person has done or abstained from doing, or does or abstain from doing, or promises to do or to abstain from doing for receiving the service.
In simple term, ‘consideration’ means everything received in return for a provision of service which includes monetary payment and any consideration of non-monetary nature as well as deferred consideration.
What is ‘Declared Services’?
In the definition of ‘service’ contained in clause (44) of section 65B of the act it has been stated that service includes a declared service. The phrase ‘declared service’ is also defined in the said section as an activity carried out by a person for another for consideration and specified in section 66E of the Act. The following nine activities have been specified in section 66E-
Renting of Immovable property;
Construction of a complex, building, civil structure ,including a complex or building intended for sale to a buyer ,wholly or partly, except where the entire consideration is received after issuance of certificate of completion by a competent authority;
Temporary transfer or permitting the use or enjoyment of any intellectual property right;
Development,design,programming,customization,adaptation ,upgradation ,enhancement, implementation of information technology software;
Agreeing to the obligation to refrain from act, or to tolerate an act or situation ,or to do an act;
Transfer of goods by way of hiring ,leasing ,licensing, or any such manner without transfer of right to use such goods;
Activity in relation to delivery of goods on hire purchase or any system of payment by installments;
Service portion in execution of works contracts act;
Service portion in any activity wherein goods, being food or any article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as part of the activity.
In terms of section 66B of the act, service tax will be leviable on all services provided in the taxable territory by a person to another for a consideration other than the services specified in the negative list.
The services specified in the negative list therefore go out of the ambit of chargeability of service tax which is specified in the act itself in section 66D .
Which services are covered in the Negative List?
As of now there are seventeen heads of service that have been specified in the negative list .Their scope and ambit are as follows-
1. Services by government or a local authority excluding the following services to the extent they are not covered elsewhere-
i. Services by the Department of Posts by way of speed post, express parcel post ,life insurance and agency services provided to a person other than the government ;
ii. Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;
iii. Transport of goods or passengers ;or
iv. Support services ,other than services covered under clauses (i) and (iii) above, provided to business entities ;
2. Services by the Reserve Bank of India;
3. Services by a Foreign Diplomatic Mission located in India;
4. Services relating to agriculture by way of-
i. agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed testing;
ii. supply of farm labour;
iii. processed carried out at an agricultural farm including tending ,pruning, cutting, harvesting ,drying, cleaning , trimming, sun drying, fumigating, curing, sorting, grading ,cooling or bulk packing and such like operations which do not alter the essential characteristics of agricultural produce but make it marketable for the primary market;
iv. renting or leasing of agro machinery or vacant land with or without structure incidental to its use;
v. loading, unloading, packing, storage or warehousing of agricultural produce ;
vi. agricultural extension services;
vii. services by an Agricultural Produce Marketing Committee or Board or Services provided by a commission agent for sale or purchase of agricultural produce ;
5. Trading of goods;
6. Any process amounting to manufacture or production of goods;
7. Selling of space or time slots for advertisements other than advertisements broadcast by radio or television;
8. Services by way of access to a road or a bridge on payment of toll charges;
9. Betting , gambling of lottery;
10. Admission to entertainment events or access to amusement facilities;
11. Transmission or distribution of electricity by an electricity transmission or distribution utility;
12. Services by way of-
i. Pre-school education up to higher secondary school or equivalent ;
ii. Education as a part of curriculum for obtaining a qualification recognized by any law for the time being in force;
iii. Education as a part of an approved vocational education course
13. Services by way of renting of residential dwelling for use as residence;
14. Services by way of-
i. Extending deposits ,loans or advances in so far as the consideration is represented by way of interest or discount ;
ii. Inter se sale or purchase of foreign currency amongst bank and authorized dealers of foreign exchange or amongst banks and such dealers
15. Service of Transportation of passengers, with or without accompanied belongings ,by-
i. A stage carriage ;
ii. railways in a class other than-
A. First Class; or
B. An air conditioned coach ;
iii. Metro ,monorail ,tramway;
iv. Inland waterways;
v. Public transport ,other than predominantly for tourism purpose ,in a vessel of less than fifteen tones net; and
vi .Metered cabs ,radio taxis or auto rickshaws;
16. Services by way of transportation of goods –
i. By road except the services of –
A. A goods transport agency ;or
B. A courier agency;
ii. By an aircraft or a vessel from a place outside India to the first customs station of landing in India ;or
iii. By Inland waterways
17. Funeral, burial, crematorium or mortuary services including transportation of the deceased.
The other important points to be kept in mind-
The services not under the negative list will attract 12% of service tax (plus cess)
The concept of negative list is practiced globally and is proposed to be introduced in India as part of the goods and service tax (GST) regime.
Exemption to Small Service Provider from 100% of service tax when aggregate value of taxable services rendered by him from one or more premises, does not exceed Rs.10 lakhs in the preceding financial year.
If the aggregate value in any financial year, for which exemption has been claimed, exceeds Rs. 10 lakhs, then such excess over Rs.10 lakhs shall be chargeable to service tax.
(The author is a Student of CA-Final and has also completed his B.com)
By: Sumit Bhatia
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