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Govt widens ambit of service tax

From second homes and AC rail travel to private tutors, astrologers and marriage-makers come under the tax net

Vrishti Beniwal  |  New Delhi 

A visit to an astrologer may cost you more from next month. The negative list for taxation of services will come into effect from July 1. Those services outside the list will be taxed, including astrologers, marriage-makers, actors, private tutors, board of directors and a host of new services under the tax ambit.

Residential construction of more than one unit will also be taxed at 12 per cent in the new tax regime. Service tax will be levied on other construction services like new work contracts of immovable property, construction for non-government for non-commercial purpose, private roads and renting to government and non-for-profit organisations.

In the entertainment sector, services of commercial artists, performers, TV and film actors, directors and reality show judges will be subjected to service tax. Other forms of entertainment such as magic shows, mimicry, western music or dance, modern theatres, brand ambassadors, etc, will also be taxed. However, activities by a performing artist in folk or classical art forms of music, dance or theatres will not be taxed. Services provided by sportspersons in IPL would attract service tax, as it is not a recognised sports format.

“Services provided outside the terms of employment will be taxable. For example, private coaching beyond school hours when there is no obligation to do so under the contract are taxable,” said a finance ministry official. Overtime is not taxable, he added.

Consideration (anything monetary and non-monetary received in return for provision of service) without activity like pure gifts, rewards and personal obligations like pocket money or tourist information given free of charge will not be taxed. Accidental damages are not taxable, but damages for longer duration of use will be taxed. On an amount received in court settlement, consideration will be taxable but not cost.

Subsidies will be taxable when they influence unit price to the extent that the price changes in proportion to the amount given. Deficit subsidies will not be taxed.

A final guidance paper on the Negative List, notified by the government this week, will be released by the finance ministry shortly to help taxpayers know what is taxable and what is not, Central Board of Excise & Customs Chairman S K Goel said at an Assocham seminar on Thursday.

Members of legislatures and local bodies; persons holding constitutional positions such as judges, President, Governor, and those holding position of chairperson, member or director of an entity established by the government will not be taxed.

Some of the other services to be taxed in the new regime include air-conditioned travel by rail, transfer of goods by rail, tourism boats, non-business consultancy to government, non-compete services, arbitrators to business enterprises, expense allocation among associations, banking services to government, discourses and lectures, services to RBI, telephone calls from hotels, uplink to satellite, horse breeding, telecom authorities outside India, services from Jammu & Kashmir when provided in taxable territory (India) and courier services abroad.

CONSTRUCTION SECTOR * Non-compete services
* New work contracts of immovable property * Arbitrators to business enterprises
* Non-commercial construction for 
non-government purpose
* Expense allocation among associations
* Private roads * Banking services to government
* Renting to government and non-for-profit organisations n Unrecognised IPR
* Residential construction of more than one unit MISCELLANEOUS
ENTERTAINMENT * Discourses and lectures
* Commercial artists/performers * Services to RBI
* Actors, directors * Hotel telephone calls
* Reality show judges * Uplink satellite
TRANSPORTATION * Private tuitions
* Travel by railways in AC coaches * Horse breeding
* Goods transfer by rail * Marriage-makers
* Tourism boats * Astrologers 
BUSINESS * Telecom authorities outside India
* Non-business consultancy to government * Services from J&K when provided in taxable territory (India)
* Board directors’ fees * Courier services abroad

The finance ministry has set an ambitious target of over 30 per cent growth in service tax revenue in 2012-13 over the revised estimate of Rs 95,000 crore in the current financial year, as the service tax rate has been increased by two per cent to 12 per cent, along with the introduction of the negative list. In the negative list, 17 categories of services will be kept out of the service tax bracket, whereas 34 others will be exempted from taxation. At present, 119 services are taxed by the government, while exemption has been provided on 88 services.

First Published: Fri, June 08 2012. 00:20 IST