After the recent amendments in service tax laws, we have quite often come across the words “Negative List”. Simply put, a negative list of services means a list of services which will not be charged to service tax. This also means that, all other services, other than those mentioned in the negative list will be taxable. (For latest amendment of Union budget 2014-201 5 Kindly refer Service Tax Proposal on http://taxclick.org/type/miscellaneous/union-budget-2014—2015-highlights-on-tax-proposal)
This can also be called as the comprehensive approach. Until now, service tax was based on a selective approach, i.e. a selected list of services was subject to service tax. However, as there was considerable increase in the list of services being brought under service tax, it posed an administrative challenge. As a result of the comprehensive approach, all services would be taxable except those that are specifically excluded or exempt. With the Negative List, there is a Mega Exemption which provides a broad list of exemptions.
The negative list is given under Section 66D. It contains 17 activities. It would be appropriate to call the negative list, a list of activities rather than a negative list of services because some of the activities mentioned in said list are not services.
The Negative lists of services are as under:
1) Services provided by Government or Local authority
Most of the services provided by the Central or State Government or Local authorities are in the negative list except the following:
a) Services provided by the Department of Posts by way of speed post, express parcel post, life insurance and agency services carried out on payment of commission on non government business;
b) Services in relation to a vessel or an aircraft inside or outside the precincts of a port or an airport;
c) Transport of goods and/or passengers;
d) Support services, other than those covered by clauses (a) to (c) above, to business entities.
2) Services provided by Reserve Bank of India
All services provided by the Reserve Bank of India are in the negative list. Services provided to the Reserve Bank of India are not in the negative list and would be taxable unless otherwise covered in any other entry in the negative list.
3) Services by a Foreign Diplomatic Mission Located in India
Any service that is provided by a diplomatic mission of any country located in India is in the negative list. This entry does not cover services, if any, provided by any office or establishment of an international organization.
4) Services relating to agriculture
The services relating to agriculture that are specified in the negative list are as below:
a) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed testing;
b) supply of farm labour;
c) processes carried out at the agricultural farm including tending, pruning, cutting, harvesting, drying cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter essential characteristics of agricultural produce but makes it only marketable for the primary market;
d) renting of agro machinery or vacant land with or without a structure incidental to its use;
e) loading, unloading, packing, storage and warehousing of agricultural produce;
f) agricultural extension services;
g) services provided by any Agricultural Produce Marketing Committee or Board or services provided by commission agent for sale or purchase of agricultural produce;
h) Testing activities in relation to agriculture and agricultural produce Further the activities like breeding of fish (pisciculture), rearing of silk worms (sericulture), cultivation of ornamental flowers (floriculture) and horticulture, forestry is also included in the definition of agriculture. The plantation crops like coffee, tea are also covered in agricultural produce.
5) Trading of Goods
Transfer of title of goods is one of the essential conditions for a transaction to come under the ambit of trading of goods. However, the services supporting or ancillary to the trading of goods would not come under the above item of Negative List.
6) Processes amounting to Manufacture or Production of Goods
The phrase processes amounting to manufacture or production of goods has been defined in section 65B of the Act as a process on which duties of excise are leviable under section 3 of the Central Excise Act, 1944 (1 of 1944) or any process amounting to manufacture of alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and narcotics on which duties of excise are leviable under any State Act.
This entry, therefore, covers manufacturing activity carried out on contract or job work basis provided duties of excise are leviable on such processes under the Central Excise Act, 1944 or any of the State Acts.
7) Selling of Space or Time Slots for Advertisements other than Advertisements Broadcast by Radio or Television
Sale of space for advertisement in print media, bill boards, public places, buildings, conveyances, cell phones, automated teller machines, internet, Aerial advertising are covered in negative list.
However, Sale of space or time for advertisement to be broadcast on radio or television and sale of time slot by a broadcasting organization are the taxable services.
8) Access to a Road or a Bridge on Payment of Toll Charges
The negative list entry covers access to a road or a bridge on payment of toll charges. The access to National highways or state highways, which are also roads, is hence covered in this entry.
9) Betting, Gambling or Lottery
Betting or gambling has been defined in section 65B of the Act as putting on stake something of value, particularly money, with consciousness of risk and hope of gain on the outcome of a game or a contest, whose result may be determined by chance or accident, or on the likelihood of anything occurring or not occurring. The State Government levy a betting tax on such activities.
10) Entry to Entertainment Events and access to Amusement Facilities
Entertainment event has been defined in section 65B of the Act as an event or a performance which is intended to provide recreation, pastime, fun or enjoyment, such as exhibition of cinematographic films, circus, concerts,
sporting events, fairs, pageants, award functions, dance performances, musical performances, theatrical performances including cultural programs, drama, ballets or any such event or program.
‘Amusement facility’ has been defined in the Act as a facility where fun or recreation is provided by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks, theme parks or such other place but does not include a place within such facility where other services are provided.
11) Transmission or Distribution of Electricity
An ‘electricity transmission or distribution utility‘has also been defined in section 65B of the act to means the following:
· the Central Electricity Authority
· a State Electricity Board
· the Central Transmission Utility (CTU)
· a State Transmission Utility (STU) notified under the Electricity Act, 2003 (36 of 2003)
· a distribution or transmission licensee licensed under the said Act
· any other entity entrusted with such function by the Central or State Government
12) Specified services relating to Education
The following services relating to education are specified in the negative list –
a) pre-school education and education up to higher secondary school or equivalent
b) education as a part of a prescribed curriculum for obtaining a qualification recognized by any law for the time being in force;
c) education as a part of an approved vocational education course Approved vocational education courses have been specified in section 65B of the Act. These are
a) a course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training, offering courses in designated trades as notified under the Apprentices Act, 1961 (52 of 1961)
b) a Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Employment and Training, Ministry of Labour and Employment, Government of India;
c) a course run by an institute affiliated to the National Skill Development Corporation set up by the Government of India.
d) Vocational courses offered by institutes affiliated to the State Council of Vocational Training;
13) Services by way of Renting of residential dwelling for use as residence
‘Renting’ has been defined in section 65B as “allowing, permitting or granting access, entry, occupation, usage or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property‘.
14) Financial Sector
The services of loans, advances or deposits are in the list in so far as the consideration is represented by way of interest or discount. Any charges or amounts collected over and above the interest or discount amounts would represent taxable consideration. Some examples:
· Fixed deposits or saving deposits or any other such deposits in a bank for which return is received by way of interest.
· Providing a loan or over draft facility for a credit limit facility in consideration for payment of interest.
· Mortgages or loans with a collateral security to the extent that the consideration for advancing such loans or advances are represented by way of interest.
· Corporate deposits to the extent that the consideration for advancing such loans or advances are represented by way of interest or discount.
The Invoice discounting is covered only to the extent consideration it is represented by way of discount. Any charges or amounts collected over and above the interest or discount amounts would represent taxable consideration. Services provided by banks or authorized dealers of foreign exchange by way of sale of foreign exchange to general public are not covered in Negative List.
15) Service relating to Transportation of Passengers
The following services relating to transportation of passengers, with or without accompanied belongings, have been specified in the negative list. Services by:
· a stage carriage;
· railways in a class other than (i) first class; or (ii) an AC coach;
· metro, monorail or tramway;
· inland waterways;
· public transport, other than predominantly for tourism purpose, in a vessel between places located in India ; and
· metered cabs, radio taxis or auto rickshaws.
The various other equivalent modes of transport not specified herein could be cause of dispute as the above list is not complete within each segment.
16) Service relating to Transportation of Goods
The following services provided in relation to transportation of goods are specified in the negative list:-
a) by road except the services of (i) a goods transportation agency; or (ii) a courier agency
b) by aircraft or vessel from a place outside India up to the customs station of clearance in India; or
c) By inland waterways. (Services provided as agents for inland waterways are not covered in the negative list.)
17) Funeral, Burial, Crematorium or Mortuary services including transportation of the deceased
This entry exempts services in relation to cremation, etc. of dead.
Two more services have been included in the negative list services in interim Budget 2014, as mentioned below:-
a) loading, unloading, packing, storage and warehousing of rice and
b) Services provided by cord blood banks
Notification of changes in service tax is issued as on 17/02/2014 is attached below.