Govt likely to initiate debate on negative list on service tax

In what could lead to several more services coming under the tax net, the government is likely to initiate a debate on the negative list on service tax over the next one month. Negative list means the list of services exempted from taxation.

The move is in sync with the likely implementation of goods and services tax (GST), an indirect tax regime that would subsume levies like excise, service tax and sales tax. The government is yet to come out with a comprehensive negative list.

Finance Minister Pranab Mukherjee, in his Budget 2011-12 speech, had mentioned the need to tax, based on a small negative list, so that many untapped sectors are brought into the tax net.

“As we move towards GST, we need to take a call on the negative list. We need to start a debate on the subject through discussions with bodies like industry chambers,” said V K Garg, joint secretary, tax research unit, Union ministry of finance.

It is to be noted, during his Budget speech, Mukherjee had announced a five per cent service tax on hospitals and diagnostic tests. Later, due to mounting criticism, the tax was withdrawn.

The government had recently introduced a Constitution Amendment Bill in the Lok Sabha to facilitate implementation of the Goods and Service Tax (GST).

Meanwhile, GST is likely to miss the April 2012 deadline. It has already missed the April 1, 2010 deadline. Divergences between the Centre and the state governments has been one of the key reasons for the delay.

Garg also said the government had set a service tax collection target of Rs 82,000 crore in this financial year, against about Rs 70,000 crore last year.