Reality show hosts, IPL players in tax net

The next time Amitabh Bachchan hosts Kaun Bangea Crorepati or Sachin Tendulkar hits a ton in an Indian Premier League match, the taxmen may come knocking on their doors.

Judging or hosting a reality show, participating in IPL cricket matches or planning a wedding, using a telephone or laundry services in a five-star hotel or first class train journey may all come under the tax net in the new system of taxation of services proposed in the Budget.

A negative list of 17 categories of services, which will be spared from levy of service tax was announced by Finance Minister Pranab Mukherjee as part of his Budget speech. The list, likely to come into effect from July, will provide for taxation of all services barring these 17 items and over 30 other categories of exemptions, against 88 exemptions at present.

A finance ministry official said services provided by sportsperson in IPL would attract service tax as IPL is not a recognised sports format.

The Budget has also proposed to increase the service tax rate by two percentage points to 12 per cent, which would make some of the services costlier. It, however, provided higher abatement or allowed input tax credit in some of the services. As a result services related to apartments, low-fare air travel, life insurance will become cheaper.

THE NEGATIVE LIST
Services not to be taxed:

* Services by government or a local authority

* Services by RBI

* Services by a foreign diplomatic mission in India

* Services related to agriculture

* Trading of goods

* Any process amounting to manufacture or production of goods

* Selling of space or time slots for advertisements except on radio and TV

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

* Betting, gambling or lottery

* Admission to entertainment events or access to amusement facilities

* Transmission or distribution of electricity

* Education

* Renting of residential dwelling

* Extending deposits, loans and sale or purchase of foreign currency among banks and dealers

* Transportation of passengers, goods

* Transportation of goods

* Funeral, burial, crematorium or mortuary services including transportation

Service tax on rail freight, which has been deferred several times, will be taxed under the new system. To minimise the impact, the finance ministry has allowed 70 per cent abatement with input tax credit.

“Effectively, the tax will be less than two per cent. The net gain to the department from service tax on both rail freight and passenger travel would not be more than Rs 500 crore,” said the official.

The important inclusions in the negative list comprise all services provided by the government or local authorities, except a few specified services where they compete with private sector. The list also includes pre-school and school education, recognised education, renting of residential dwellings, entertainment and amusement services and a large part of public transportation including inland waterways, urban railways and metered cabs.

The exemption list includes health care, services provided by charities, religious persons, sportspersons, performing artistes in folk and classical arts, individual advocates providing services to non-business entities, and independent journalists among others.