Broadening of tax base - Review of the Negative List

[Admin TMI]

Question - What are amendments proposed in Negative list in service tax in Finance Bill 2015 ?

[Admin TMI]

Review of the Negative List

• Service Tax to be levied on the service provided by way of access to amusement facility providing fun or recreation by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks, theme parks or such other places. The Negative List entry that covers access to amusement facility is being omitted [section 66D (j)]. Consequently, the definition of “amusement facility” [section 65B(9)] is also being omitted.

These proposed changes shall come into effect from a date to be notified by the Central Government after the enactment of the Finance Bill, 2015.

• Service Tax to be levied on service by way of admission to entertainment event of concerts, non-recognized sporting events, pageants, music concerts, award functions, if the amount charged is more than ₹ 500 for right to admission to such an event. For this purpose, the Negative List Entry that covers admission to entertainment events is being omitted [section 66D (j)]. Consequently, the definition of “entertainment event” [section 66B (24)] is being omitted.

However, the existing exemption to service by way of admission to entertainment events, namely, “exhibition of cinematographic film, circus, recognized sporting events, dance, theatrical performances including drama and ballets, by way of the Negative List entry shall be continued, irrespective of the amount charged for such service, through the route of exemption. For this purpose a new entry is being inserted in Notification No. 25/2012-ST, dated 20.6.2012.

The proposed changes shall come into effect from a date to be notified by the Central Government after the enactment of the Finance Bill, 2015.

• The entry in the Negative List that covers service by way of any process amounting to manufacture or production of goods [section 66D (f)] is being pruned to exclude any service by way of carrying out any processes for production or manufacture of alcoholic liquor for human consumption. Consequently, Service Tax shall be levied on contract manufacturing /job work for production of potable liquor for a consideration. In this context, the definition of the term “ process amounting to manufacture or production of goods” [ section 65B (40) is being amended] with a consequential amendment in S. No. 30 of notification No. 25/12-ST, to exclude intermediate production of alcoholic liquor for human consumption from its ambit.

The proposed changes shall come into effect from a date to be notified by the Central Government after the enactment of the Finance Bill, 2015.

• Presently, services provided by the Government or a local authority, excluding certain services specified under clause (a) of section 66D, are in the Negative List. Service tax applies on the “support service” provided by the Government or local authority to a business entity. An enabling provision is being made, by amending [section 66D (a)(iv)], to exclude all services provided by the Government or local authority to a business entity from the Negative List. Consequently, the definition of “support service” [section 65B(49)] is being omitted.

These amendments shall come into effect from a date to be notified by the Central Government in this regard after the enactment of the Finance Bill, 2015.

Accordingly, as and when this amendment is given effect to, all services provided by the Government or local authority to a business entity, except the services that are specifically exempted, or covered by any other entry in the Negative List, shall be liable to Service Tax .

AI Summary

Service tax expansion: access to amusement facilities and paid entertainment admissions now taxable, with specified exemptions. Service tax scope is widened by removing specific Negative List entries: access to amusement facilitys and admission to paid entertainment events will be taxable (with specified exemptions preserved by notification). The carve-out for processes amounting to manufacture is narrowed to exclude alcoholic liquor production, subjecting contract manufacturing for potable liquor to service tax. Government or local authority services to business entities are removed from the Negative List by omitting the support service concept, making such services taxable unless specifically exempted; operative dates are to be notified.