Subject: Negative List under Service Tax Act

The world of Tax Heavens is as strange as Alices Wonderland - Except the unexpected.
And exactly this has happened in the budget 2012. 18 years old service tax has been completely
changed.
In his speech the finance minister said, and I quote:
I have to be cruel in order to be kind
And minister shown his kindness on Aam Adami with the proposition of Negative list. This change in
service tax law culminated into strong reactions across in India. But India witnessed a transformation in
its approximately two decade old service tax regime hailed as a step towards the GST rollout.
Negative List of Services not liable for service tax: Union Budget 2012
Now we will see why there is a need to introduce Negative List!!!
In this era of technological developments and innovative ways of conducting several businesses, there
always seem to be a challenge to cover new services in the scope of notified taxable services. Until and
unless the business idea gets large and the tax potential from the same reaches significance that
warrants an inclusion, the services remain outside the tax purview.
So previously when positive list was there it was really difficult to define whether the service is taxable
or not. There were only 119 list of services defined in the positive list but still there were many more
interpretation arose on to taxability of service. There were lot more issues pending at the tribunal &
high court on to say whether the service you are providing is taxable or not and if it is there, then under
which head is a big issue. But now when negative list of services is introduced then it has become much
easier as to taxability that whatever is not there in the negative list is taxable. So, we are having a clear
cut idea whether we are providing taxable services or not.
The main intention of the government behind this development in the service tax was there were many
people who were providing services and they were earning lot more than expected but still they were
outside the purview of taxes because it takes years to define the services that they were & will provide.
Previously we had to apply for the registration certificate stating therein the services we were providing
& it became difficult if we changed our line of business then, we had to amend the certificate. It is
expected that due to announcement of negative list, this difficulty will be resolved.
The government introduced negative list. Now they have provided clear cut list of what services are not
to be taxed and whether any services need to be given exemption. Now it has become very easy job to
everyone and due to this many people from whom tax need to be collected but who are not in the
positive list came in the purview of taxability.
So I would definitely say that the step towards negative list was really good so as to align with the
upcoming GST.
To bring more businesses under Service Tax net; only 17 services are in the negative list keeping in view
the federal nature of our polity, the best international practice and our socio-economic requirements.
Services exempt by way of Negative List Section 66D
1. Government related services
2. Services by Reserve Bank of India

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Services by Foreign Diplomatic mission located in India

Agricultural services
Trading of goods
Process amounting of manufacture or production of goods
Selling of space or times slots for advertisements
Access to road or bridge on payment of toll charges
Betting, gambling or lottery
Admission to entertainment or access to amusement facilities
Transmission or distribution of electricity
Education, training & coaching services
Renting of residential premises
Banking, financial & insurance services
Passenger transport services
Goods transport services
Funeral, burial, crematorium or mortuary services including transportation of the deceased

We will discuss some issues related to negative list

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:
1. 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
2. Services in relation to a vessel or an aircraft inside or outside the precincts of a port or an airport
3. Transport of goods and/or passengers

Services provided by Reserve Bank of India

Are all services provided by the reserve Bank of India in the Negative List? And what about services
provided to the Reserve Bank of India?
Yes. 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. It sounds weird but still true
that Government wont tax the one that prints the money.

Services by a Foreign diplomatic mission

Whether all Services by a foreign diplomatic mission located in India are in the negative list?
Yes. Any services that are provided by a diplomatic mission of any country located in India are in the
negative list. But this entry does not cover services, if any, provided by any office or establishment of an
international organisation, such as WTO, WHO etc.

Services relating to agriculture

Any service relates to agriculture or agriculture products are covered in negative list.

Trading of goods

Would activities of a commission agent who sells goods on behalf of another for a commission included
in trading of goods?
No. The services provided by commission agent or a clearing and forwarding agent are not in the nature
of trading of goods. These are auxiliary for trading of goods.

Processes amounting to manufacture or production of goods

Would service tax be leviable on processes on which Central Excise Duty is leviable under the Central
Excise Act, 1944 but are otherwise exempted?
No. If Central Excise Duty is leviable on a particular process as the same amounts to manufacture then
such process would be covered in the negative list even if there is a central excise duty exemption for
such process.

Selling of space or time slots for advertisements other than advertisements broadcast by radio
or television

Taxable
Sale of Space or time for advertisement to be
broadcast on radio or television. Sale of time slot
by a broadcasting organization.

Non-taxable
Sale of space for advertisement in print media, in
bill boards, public places, buildings, conveyances,
cell phones, ATM, internet aerial advertising.

As a consequence the sale of space for advertisement in by mobile operators, VAS providers, websites,
blogs etc. on the Internet will be exempt and would not attract any service tax.

Access to a road or a bridge on payment of toll charges

Toll is a matter listed in list II (State list). So central government is not empowered to levy service tax on
toll charges. And if we look at it from another angle,
Just imagine!!!!!!! Trying to pay Rs. 23.60 at a toll booth with around twenty impatient cars behind
you.
Is access to national highways or state highways also covered in this entry?
Yes. National highways or state highways are also roads and hence covered in this entry.
Are collection charges or service charges paid to any toll collecting agency also covered?
No. The negative list entry only covers access to a road or a bridge on payment of toll charges. Services
of toll collection on behalf of an agency authorized to levy toll are in the nature of services used for
providing the negative list services.

Admission to Entertainment Events and access to Amusement Facilities

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.

Transmission or distribution of electricity

If charges are collected by a developer or a housing society for distribution of electricity within a
residential complex then are such services covered under this entry?

No. The developer or the housing society would be covered under this entry only if it is entrusted within
a function by the Central or a State government or if it is, for such distribution, a distribution licensee
licensed under the Electricity Act, 2003.
If the services provided by way of gensets or similar equipment by private contractors for distribution
of electricity covered by this entry?
No. The entry does not cover services provided by private contractors. Moreover the services provided
are not by way of transmission or distribution of electricity.

Specified services relating to education

Are services provided by international schools giving international certifications like IB (International
Baccalaureate) also covered in this entry?
Yes. Services provided by of education up to higher secondary school or equivalent is covered in this
entry.
Are services provided by boarding schools are covered in this entry?
Boarding schools provide service of education coupled with other services like providing dwelling units
for residence and food. This may be a case of bundled services. Taxability of such services has to be
determined in terms of the principles laid down in the section 66F of act.

Services by way of renting of residential dwelling for use as residence

So for those of us that stay in rented premises, we dont have to pay service tax. But one biggest point is
not clear as
Whether residential flats given on rent for residence purpose by a builder who is in the business of
providing studio apartments will also be covered in the negative list?
The above point has not been clarified, only based upon the CBEC guidance notes, we have interpreted
it. But logically exemption should be given only to the person who is not in the business of renting of
residential properties.

Services relating to transportation of passengers

Public Transport: Exemption applies to all kinds of transportation, on water or land, included metered
cabs. But you will pay service tax on First Class or any air-conditioned coach seats in a train.

Betting, gambling or lottery

Gambling!!!!!!! Yes, you dont have service tax if you visit casino, buy a lottery ticket or bet on a horse
race. But if you win, the income tax is quite hefty, so all this clause does is that they dont tax you when
you lose.
For the absolute end this includes funeral, burial, crematorium, hearse or mortuary services. I would say
taxes may kill you, but they dont touch final rites.
Weve got to get used to service tax, but it might not be quite as bad as initially thought. One of the
biggest expenses residential rent is exempt, as is education and transport. And for the rest, its only
logical for us to pay, since taxes are applicable in every other kind of transaction: from soaps to cars to
salaries.

Conclusion
This is in view of the fact that the successful implementation of the negative list of services does not
depend merely on notifying the negative list but needs a completer changeover in the legislative and
administration provisions. The notification of the negative list needs to be accompanied by the changes
in exemptions, CENVAT credit, abatement scheme, point of taxation, return from amongst others.
So to conclude with the role of the Government in successful implementation of negative list does not
end with obtaining the assent of state finance ministers, which is only a step towards transforming the
face of the taxation of services in this country.

Authored by:
Sagar R. Baheti.
WRO - 0347557
CA-IPCC
Plot No. 1 Swayamsiddha Hsg Society, L.B.S. Road Pune-30.
09403579391,08237324648
sbaheti48@yahoo.com