What Is Negative List Under Service Tax?

. 5 min read
What Is Negative List Under Service Tax?

How Many Services Are There In Negative List Of Supply?

  • A tax is a mandatory financial charge that is levied by governments or organisations on individuals called taxpayers.
  • The primary goal of imposing any tax is to generate income for the government, thus boosting the economy of the country.
  • In India, taxes can be mainly categorised into direct taxes and indirect taxes.
  • A direct tax is paid by a taxpayer directly to the government and is easier to estimate at the source.
  • Examples of direct tax are income tax and wealth tax.
  • Indirect tax is to be paid by a product or service seller, which is passed on to the end-user, who ultimately pays the tax.
  • This indirect flow of money from the end-user to the government via a service provider has led to its name—indirect tax.
  • Examples of indirect tax include Value Added Tax (VAT) and Goods and Services Tax (GST).
  • Service tax is a type of indirect tax introduced in India by the Finance Act, 1994.
  • As the name suggests, a service tax is payable to the government by individuals and organisations that provide any kind of service.
  • These service providers often pass off the tax to their customers, who end up paying the service tax.
  • Examples of service providers that need to pay service tax are hotels, restaurants, travel agents, cab services, cable providers, etc.
  • As per the government of India’s service tax law, service providers must register if they must pay tax under reverse charge, if they are an input service provider, and if their income exceeds 9 lakhs.
  • According to the old scheme of service tax, only three services were taxable; its concept was based on a positive list of services.
  • In the Union budget of 2012, a new tax regime was introduced, called the negative list.
  • Under the new system, all services are taxable except the ones that are specified in the negative list.
  • After this announcement, the Central Board of Indirect taxes and Customs (CBIC) issued a notification enlisting the services that will be exempted from the service tax.
  • Finance Act, 2012, included two sections about the negative list of the service tax.
  • Section 65B included definitions of the new taxable services, while Section 66D of the Finance Act, 1994, introduced the ‘negative list of services’.
  • However, no service tax is applicable for an income up to Rs. 10 Lakhs in a financial year.
  • The initial service tax percentage was 5% of the total value of service, which has been gradually increased.
  • As per the budget of 2015-2016, service tax was enhanced to 14%, with additional taxes in the form of Swachh Bharat cess of 0.50% and Krishi Kalyan cess of 0.50%, which takes the total to 15%.

The negative list of services as provided in Section 66D of the Finance Act, 1994, comprises the following:

Services by the government or an area authority excluding the subsequent services to the extent that they’re not lined elsewhere:

  1. Services by the Department of Posts by Speed Post or by Express Parcel post, life insurance, and agency services rendered to any individual apart from the government.
  2. Services with regards to an aircraft or a carrier, within or outside the scope of a port or an airport.
  3. Goods or passengers being transported.
  4. All other support services other than those mentioned in a to c, which is provided to business entities and organisations.
  • Services that are offered by the Reserve Bank of India.
  • Services offered by a foreign diplomatic mission that is currently located in India.
  1. Agricultural operations directly associated with the production of any agricultural manufacture as well as plant protection, harvesting, cultivation, threshing, and testing.
  2. Supply of farm labor.
  3. Processes administered at an agricultural farm such as tending, pruning, sorting, grating, and similar practices.
  4. The operations that do not alter the essential characteristics of farm produce, such as sun drying, harvesting, fumigating, and curing, are also included.
  5. Their purpose was to make the farm produce easily marketable.
  6. Renting agro machinery or leasing vacant land that may or may not include any structure accompanying its use.
  7. Warehousing, which includes packing and storage of produce. Loading and unloading are also included.
  8. Extension services of agriculture.
  9. Services of marketing by any committee for promoting agricultural produce, by any agent for the sale of agricultural produce.
  • Commercialisation and trade of goods.
  • Any process or method amounting to manufacture or production of goods and products.
  • Trade of space and/or time slots for marketing. Advertisements except those that are broadcasted on radio or television.
  • Services by the approach of access to road or bridge, after payment of toll charges.
  • Betting, gambling, or lottery.
  • Admission to recreational events and access to amusement facilities and entertainment.
  • Transmission of electricity by a provider. Distribution of electricity by any utility.

Services provided through-

  1. School education, including pre-school to higher secondary.
  2. To obtain a qualification, education that is included in a curriculum, recognized by any law.
  3. Approved vocational course education.
  • Services by use of rental habitation through renting.

Services provided through the way of-

  1. Expanding discounts, loans, or advances such that the consideration is represented through interest or discount.
  2. Sale or purchase of foreign currency, amongst banks and dealers, or banks and authorized dealers of foreign exchange.

Service of movement of passengers through transportation units, with belongings such as-

  1. Stage carriage
  2. One railway in a category other than first-class or air-conditioned class.
  3. Metro or subway and tramway or monorail.
  4. Waterways that are laid inland.
  5. Public transport, except for the ones used for tourism purposes, of fewer than fifteen-ton net value.
  6. Motorcars, metered taxi or cab, autorickshaws.

Services by the approach of transportation of products and goods-

  • By road except those serviced through goods or products transportation agency or courier agency.
  • Through an aircraft or from an area that lies outside of India to the primary customs station that comes first on landing in the country.
  • By inland/interior waterways.
  • Services for transportation of the deceased and place of ceremony for the deceased such as the crematorium, mortuary, burial ground, and funeral ground.
  • All these points are included in the negative list of service tax.
  • The negative list of services is a little different from the list of exempted services.
  • Exempted services are those that are still taxable but not in the form of service tax.
  • While the negative list of services is not taxable at all.
  • Inclusion of a service in the negative list implies that:
  1. They will not be subject to service tax, and all other services that fall in the definition of ‘services’ will be taxable.
  • In the year 2015-2016, revenue generation for the Indian government through service tax was Rs. 211456 crores.

Also Read:

What Is Service Tax In India? Examples and more.

How To Pay Income Tax Online? Step-By-Step Guide.

How To Manage Investment During Covid-19 Pandemic?


Q- What kind of tax is a service tax?

Ans- Service tax is a type of indirect tax that is imposed on a service provider, who levies it on the customer or consumer.

Q- What is the current applicable percentage of service tax?

Ans- The current percentage of service tax levied stands at 15%.

Q- Are all other services except those mentioned in the negative list to be taxed under service tax?

  • All services mentioned in the negative list are non-taxable, but there is also a list of exempt services that are outside the scope of service tax.
  • These exempted services may or may not be taxed under any other tax structure.

Q- Which department of the Indian government levies service tax?

Ans- The CBIC or Central Board of Indirect taxes and Customs is responsible for levying Service tax, through the powers invested in them by Finance Act, 1994.