Which services should not be taxed? Govt seeks public views
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Govt seeks public views on service tax

In order to broaden the tax net, the Government on Friday sought public opinion on possibility of a negative list for service tax meaning that all services which are not mentioned in it would be taxed under the proposed GST regime.

 PTI   
  • May 6, 2011  
  • |  
  • UPDATED   20:37 IST

In order to broaden the tax net, the Government on Friday sought public opinion on possibility of a negative list for service tax meaning that all services which are not mentioned in it would be taxed under the proposed GST regime.

"The main issues that are sought to be deliberated in the debate are advantages and disadvantages of a negative vis a vis a positive list...definition of the term 'service' and possible list of services that merit to be included in the negative list," the Finance Ministry statement said.

Services mentioned in the positive list will be taxed. Currently, only a few services come under the tax net. But after Goods and Service Tax (GST) is implemented, taxes would be levied on most of the services.

The services sector contributes more than 50 per cent of the GDP but its representation in revenue is relatively low.

The GST would subsume most of the indirect taxes like excise duty and service tax at the central level and VAT on the state front, besides local levies.

A Constitution Amendment Bill is pending in parliament which seeks to pave the way for introduction of GST.

The ministry further said that "areas that would need to be exempted separately even after moving towards the proposed negative list...are also to be deliberated upon".

Finance Minister Pranab Mukherjee had announced in the Budget 2011-12 that a public debate on the services tax to help the government finalise the approach to GST would take place.

"A concept paper on the subject is proposed to be drafted after the feedback from the stakeholders," the Finance Ministry statement added. Comments on the issue are to be sent to the Directorate General of Service Tax by June 15.

The ministry has sought participation of major industry federations like FICCI, ASSOCHAM, PHDCCI and CII besides academic institutions like NIPFP before finalising the concept paper.

The ministry also wants opinion on the right approach for India, the international experience of taxation of services where the concept of negative list is in vogue and important issues arising by moving towards the taxation of services based on negative list.