Service tax hike from 12.36% to 14%, negative list pruned

New Delhi

Finance Minister Arun Jaitley today hiked service tax from 12.36% to 14%. This will make number of services costlier. There was a concern that service tax was already high. Now instead of relief, it has been further hiked.

Finance Minister in his budget speech also announced that negative list of Service Tax has been pruned.

Here is a list of services under service tax to have an idea that hike in Service tax will make which services costlier. It’s almost like as soon as you leave you home and spend money you are under service tax net. The list will become even longer as negative list has been pruned.

Jaitley replies media’s question on service tax:

Jaitley later in his press conference in Delhi when asked about Service Tax, replied, “Services is a large part of Indian economy. In fact today it is the largest segment of Indian economy. Now if services are not levied to tax, agriculture in any case there’s no tax. So that only leave the entire taxation to manufacturing sector and render it uncompetitive. Society runs on tax. Tax is an instrument of social engineering, therefore services have to be taxed otherwise you will not get any service so far as government is concerned because the government has no money.

Service Tax part of Finance Minister’s speech:

I. Change in Service Tax rates:

1) The service tax rate is being increased from 12% plus Education Cesses to 14%. The ‘Education Cess’ and ‘Secondary and Higher Education Cess’ shall be subsumed in the new service tax rate. The revised rate shall come into effect from a date to be notified.

II. Review of the Negative List

1) Service tax to be levied on the service provided by way of access to amusement facility such as rides, bowling alleys, amusement arcades, water parks, theme parks,etc.

2) Service tax to be levied on service by way of admission to entertainment event of concerts, non-recognized sporting events, pageants, music concerts and award functions, if the amount charged for admission is more than Rs 500. Service by way of admission to exhibition of the cinematographic film, circus, dance, or theatrical performances including drama, ballets or recognized sporting events shall continue to be exempt.

3) Service tax to be levied on service by way of carrying out any processes as job work for production or manufacture of alcoholic liquor for human consumption.

4) An enabling provision is being made to exclude all services provided by the Government or local authority to a business entity from the Negative List. Once this amendment is given effect to, all service provided by the Government to business entities, unless specifically exempt, shall become taxable.

III. Review of General Exemptions

1) Exemption presently available on specified services of construction, repair of civil structures, etc. when provided to Government shall be restricted only to,-

a) a historical monument, archaeological site

b) canal, dam or other irrigation work;

c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal.

2) Exemption to construction, erection, commissioning or installation of original works pertaining to an airport or port is being withdrawn.

3) Exemption to services provided by a performing artist in folk or classical art form of (i) music, or (ii) dance, or (iii) theater, will be limited only to such cases where amount charged is upto Rs 1,00,000 per performance (except brand ambassador).

4) Exemption to transportation of ‘food stuff’ by rail, or vessels or road will be limited to transportation of food grains including rice and pulses, flours, milk and salt only. Transportation of agricultural produce is separately exempt which would continue.

5) Exemptions are being withdrawn on the following services:

(a) services provided by a mutual fund agent to a mutual fund or assets management company;

(b) distributor to a mutual fund or AMC; and

(c) selling or marketing agent of lottery ticket to a distributor of lottery.

6) Exemption is being withdrawn on the following services,-

(a) Departmentally run public telephone

(b) Guaranteed public telephone operating only local calls

(c) Service by way of making telephone calls from free telephone at airport and hospital where no bill is issued

7) Existing exemption notification for service provided by a commission agent located outside India to an exporter located in India is being rescinded, as this notification has become redundant in view of the amendments made in law in the previous budget, whereby services provided by such agents have been excluded from the tax net.

Service Tax Exemptions

1) Services of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables are being exempted.

2) Life insurance service provided by way of Varishtha Pension Bima Yojna is being exempted.

3) Service provided by way of exhibition of movie by the exhibitor/theatre owner to the distributor or association of persons consisting of exhibitor as one of it’s member is being exempted.

4) All ambulance services provided to patients are being exempted.

5) Service provided by way of admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve is being exempted.

6) Transport of goods for export by road from the factory to a land customs station (LCS) is being exempted.

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