Loading...

Top
Help
×

By creating an account you can:

Logo TaxTMI
Call Us / Help / Feedback

Contact Us At :

E-mail: [email protected]

Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters 0/2000
Make Most of Text Search
  1. Checkout this video tutorial: How to search effectively on TaxTMI.
  2. Put words in double quotes for exact word search, eg: "income tax"
  3. Avoid noise words such as : 'and, of, the, a'
  4. Sort by Relevance to get the most relevant document.
  5. Press Enter to add multiple terms/multiple phrases, and then click on Search to Search.
  6. Text Search
  7. The system will try to fetch results that contains ALL your words.
  8. Once you add keywords, you'll see a new 'Search In' filter that makes your results even more precise.
  9. Text Search
Add to...
You have not created any category. Kindly create one to bookmark this item!
Create New Category
Hide
Title :
Description :
❮❮ Hide
Default View
Expand ❯❯
Close ✕
🔎 News - Adv. Search
TEXT SEARCH:

Press 'Enter' to add multiple search terms. Rules for Better Search

Search In:
Main Text + AI Text
  • Main Text
  • Main Text + AI Text
  • AI Text
Category: ?
Categorized by AI
---- All Categories ----
  • ---- All Categories ----
  • Income Tax
  • GST
  • Customs, DGFT & SEZ
  • FEMA & RBI
  • Corp. Laws, SEBI & IBC
  • PMLA, Black Money & ED
  • Budget
  • News and Press Release
  • PTI News
Month:
---- All Months ----
  • ---- All Months ----
  • January
  • February
  • March
  • April
  • May
  • June
  • July
  • August
  • September
  • October
  • November
  • December
Year:
---- All Years ----
  • ---- All Years ----
  • 2026
  • 2025
  • 2024
  • 2023
  • 2022
  • 2021
  • 2020
  • 2019
  • 2018
  • 2017
  • 2016
  • 2015
  • 2014
  • 2013
  • 2012
  • 2011
Sort By: ?
In Sort By 'Default', exact matches for text search are shown at the top, followed by the remaining results in their regular order.
Relevance Default Date
    APEDA and Government of Tripura Organise International Organic Buyer-Seller Meet to Expand Global Market Linkages
    WPI inflation eases to 9.78 pc in July on softening in fuel prices
    IDFC FIRST Bank secures its first international rating with Investment Grade from S&P Global Ratings
    DRI busts illegal drug manufacturing facility in Jewar, UP; 30 kg drugs seized and two persons arrested
    UCO Bank launches IFSC Banking Unit at GIFT City
    Banking sector has key role to play as India on way to become 3rd largest economy: Gujarat CM
    India's exports to US rise 12.85 pc in Jul; shipments to China jump 64.57 pc: Govt data
    50 tonnes of copper without e-way bills seized by Delhi GST, Railways joint team
    India's exports surge 19.6 pc in Jul; trade deficit widens to six-month high
    CBI ARRESTS CGST SUPERINTENDENT IN BRIBERY CASE
    The cumulative exports (merchandise & services) during April-July 2026-27 is estimated at US$ 316.42 Billion, as compared to US$ 279.63 Billion in Apr...
    Unlimit Mobile Ties Up with ICICI Bank Canada, RBC Royal Bank to Add Mobile Connectivity Benefits to Student GIC Journey
    Standard Chartered Accelerates India's GCC Growth with its Global Banking Expertise and 25 Years of GCC Experience
    IFSCA Grants Nexent Capital GIFT City Investment Banking License
    India's exports rise 19.63 pc to USD 44.24 bn in Jul; trade deficit widens to $31.98 bn
    Vizhinjam port to commence EXIM operations from Aug 18: Kerala CM Satheesan
    Ratul Puri: Beyond Low-Cost Power to Clean Energy Reliability
    PMS Bazaar Collaborates with NSDL Database Management Limited (NDML Accreditation Agency) to Expand Access to SEBI Accredited Investor Certification
    Compounded annual growth rate of Manufacturing GVA at constant prices (2022-23 base) as per revised series during 2022-23 to 2025-26 is 10.88%
    National Company Law Tribunal (NCLT) Launches e-Inspection and e-Certified Copy Services
❯❯
Maximize Maximize Maximize
0 / 200
Expand Note
Add to Folder

No Folders have been created

+

Are you sure you want to delete "My most important" ?

NOTE:

News
Showing Results for :
Reset Filters
Results Found:
Show All Summaries Hide All Summaries
August 14, 2026
Show AI Summary
International organic buyer-seller linkages support Tripura producers through direct sourcing engagement, market access and sustainable export opportunities.
International Organic Buyer-Seller Meet in Tripura created a direct platform for organic producers, Farmer Producer Organisations, exporters and international buyers to explore sourcing opportunities, market requirements and long-term commercial linkages. Organic and naturally produced goods, including Queen Pineapple, GI-tagged Kalikhasa Rice, organic ginger and turmeric, black sesame, jackfruit and scented lemon, were showcased through product displays and producer interactions. The initiative seeks to strengthen global market access, sourcing partnerships and income opportunities for organic farmers.
August 14, 2026
Show AI Summary
Wholesale price inflation moderation was driven by softer fuel prices, while manufactured goods and primary articles recorded higher inflation.
Wholesale price inflation moderated in July, led by a decline in fuel and power inflation and a marginal easing in food-article inflation. Inflation in manufactured products and primary articles increased, making the moderation uneven across groups. Mineral oils, food articles, basic metals, non-food articles, food products, and chemical products remained significant inflation drivers. The output Producer Price Index remained unchanged year-on-year, with lower manufacturing and mining inflation offset by higher agriculture and electricity producer-price inflation.
August 14, 2026
Show AI Summary
International investment-grade issuer ratings support expanded foreign-currency funding, trade finance, correspondent banking and cross-border financial market access.
IDFC FIRST Bank's inaugural international investment-grade issuer credit ratings, with a stable outlook, are expected to improve access to international funding markets and global financial counterparties. The rating is intended to support standby letter of credit lines, foreign-currency funding through its GIFT City International Banking Unit, mobilisation of FCNR(B) deposits, correspondent banking relationships and cross-border trade finance. Strong capitalisation, improving profitability, stable asset quality and a granular retail funding profile underpin the outlook.
August 14, 2026
Show AI Summary
Clandestine psychotropic drug manufacturing faces enforcement targeting precursor chemicals, concealed laboratories, illicit production networks and trafficking operations.
Enforcement action against clandestine manufacture of psychotropic substances led to the detection of a residential drug-production facility. Searches recovered amphetamine and intermediary forms, precursor chemicals, reagents, raw materials, and manufacturing equipment. Field testing indicated the presence of amphetamine, a psychotropic substance regulated under the Narcotic Drugs and Psychotropic Substances Act, 1985. The recovered apparatus and materials indicated illicit manufacture, while preliminary investigation pointed to short-term, intermittently operated facilities intended to conceal production activities.
August 13, 2026
Show AI Summary
International banking unit expands cross-border financing, trade finance and foreign-currency service access through GIFT City operations.
UCO Bank has launched an International Financial Services Centre Banking Unit at GIFT City to provide permitted international banking services. The unit offers trade finance, external commercial borrowings, foreign-currency loans, loan syndication, treasury services and other permitted financial services. It serves Indian corporates, exporters, importers, financial institutions, overseas businesses and other eligible customers requiring cross-border financing and access to global financial markets. FCNR(B) deposits are also offered through the unit.
August 13, 2026
Show AI Summary
Last-mile credit access is prioritised through timely lending, wider beneficiary coverage, digital support and stronger fraud vigilance.
Banking-sector participation is emphasised through last-mile credit access for MSMEs, women entrepreneurs, rural artisans, small farmers and other underserved beneficiaries. Banks are urged to expedite government-scheme applications, maximise coverage and use technology for timely financial support. Industrial-policy assistance and incentives cover startups, SC/ST entrepreneurs, persons with disabilities and first-generation entrepreneurs. Greater coordination, expanded village banking access, and vigilance against cyber fraud and mule accounts are also prioritised.
August 13, 2026
Show AI Summary
Merchandise trade growth saw rising exports to major markets alongside increased imports and continuing United States trade-pact negotiations.
India's merchandise trade data records increased July exports to the United States and China, alongside growth in imports from both markets. Exports to Singapore, the United Arab Emirates, the Netherlands, Germany, South Africa, Tanzania, Australia, Malaysia, Sri Lanka, Italy and Vietnam showed positive growth, while July exports declined for the United Kingdom, Bangladesh, Saudi Arabia and Nepal. Imports also increased from Russia, Korea, Singapore, Germany, Oman, Malaysia, Taiwan and Brazil. India and the United States are negotiating a trade pact amid an additional United States tariff on India.
August 13, 2026
Show AI Summary
GST transport documentation enforcement addresses freight movement of metals without valid e-way bills and invoices under applicable rules.
GST enforcement action led to the seizure of copper and aluminium ingots transported by freight train without valid e-way bills and invoices. The metals were found in three train wagons during inspection of parcel cargo. Further proceedings are to be undertaken under applicable GST rules concerning movement of goods without prescribed transport documentation.
August 13, 2026
Show AI Summary
Merchandise trade deficit widens as import growth outpaces exports despite strong petroleum, electronics and engineering shipments.
Merchandise trade in July 2026 saw exports rise 19.63 per cent and imports increase 17.52 per cent, widening the trade deficit to a six-month high. Petroleum products, electronics, engineering goods and marine goods supported export growth, while crude oil and several commodity and capital-goods categories increased imports. During April-July 2026-27, faster import growth widened the cumulative merchandise trade deficit compared with the corresponding prior-year period.
August 13, 2026
Show AI Summary
Bribery allegations in GST enforcement prompted arrest after alleged payment demand to avoid a tax-liability notice.
Bribery allegations involving GST enforcement led to the arrest of a CGST Superintendent after a complaint alleged that payment was demanded from a private company to avoid issuance of a tax-liability demand notice and to close the matter. A trap operation resulted in the public servant being apprehended while allegedly accepting part of the demanded bribe, and the amount accepted was recovered. Searches were undertaken, and investigation remained ongoing.
August 13, 2026
Show AI Summary
Trade performance shows rising merchandise and services exports, but faster import growth expands the overall trade deficit.
India's combined merchandise and services exports and imports increased in July 2026 and April-July 2026-27, while the overall trade deficit widened. Cumulative exports were estimated at US$ 316.42 billion and imports at US$ 365.85 billion, resulting in a trade deficit of US$ 49.43 billion. Merchandise exports, non-petroleum exports, and exports excluding petroleum and gems and jewellery grew, led by petroleum products, electronic goods, engineering goods and chemicals. Services trade recorded a cumulative surplus of US$ 69.17 billion.
August 13, 2026
Show AI Summary
Student GIC referral programmes integrate connectivity credits with funding verification and post-arrival banking arrangements for eligible international students.
Referral arrangements connect mobile connectivity benefits with the Student Guaranteed Investment Certificate application journey. Applicants may access an online portal through a referral link, submit documents, complete know-your-customer verification, and fund the GIC from permitted Indian bank accounts in no more than two transactions. After arrival, students may activate the GIC account and open a linked bank account for receipt of GIC transfers. Eligible verified applicants receive non-cash mobile credits usable only against mobile bills, subject to a cap on the bill portion payable through credits.
August 13, 2026
Show AI Summary
Global Capability Centre banking support connects offshore and onshore operations to simplify financial management and enable cross-border expansion.
Global Capability Centre banking support is positioned around connected offshore and onshore banking, international network access, digital banking platforms, and expertise in treasury centres, cross-border corporates, and evolving GCC operating models. The approach seeks to simplify financial operations and support GCC expansion across global markets. India's GCC ecosystem is characterised as a leading global capability hub, with capability centres evolving into strategic enterprise hubs requiring support for operational and financial complexities across markets.
August 13, 2026
Show AI Summary
Investment banking registration enables regulated cross-border offerings, listings, debt transactions and capital-market advisory through GIFT City.
IFSCA registration under the IFSCA (Capital Market Intermediaries) Regulations, 2025 authorises Nexent Capital IFSC Private Limited to operate as an investment banker from GIFT City. Permitted activities include management of initial and follow-on public offerings, SPAC and secondary listings, depository receipt issuances, debt capital-market transactions, and other capital-market advisory mandates. The firm proposes to provide transaction structuring, listing-readiness, execution and post-listing capital-markets support for companies seeking capital raising and listing opportunities through GIFT City's exchanges.
August 13, 2026
Show AI Summary
Merchandise export growth was driven by petroleum, electronics, engineering and marine goods, while rising imports widened the trade deficit.
India's merchandise exports increased in July, while imports also rose and widened the trade deficit. Export growth was attributed to higher overseas shipments of petroleum products, electronics, engineering goods and marine goods. Exports and imports both recorded growth during the April-July fiscal period, and exports to West Asian countries increased in July.
August 13, 2026
Show AI Summary
EXIM operations at international seaport to commence after customs clearance, bonded-area establishment, and temporary highway connectivity.
Vizhinjam International Seaport is scheduled to commence EXIM operations after Customs clearance, issuance of Customs notifications, establishment of a Customs-bonded area, and temporary connectivity to NH-66. The port had previously handled transshipment operations. A proposed transfer of a stake in the port concessionaire to a foreign shipping company remains under committee examination and requires Central Government consideration of strategic and security aspects.
August 13, 2026
Show AI Summary
Renewable energy reliability requires storage, grid readiness and ancillary service markets alongside competitive clean-power procurement.
Renewable energy procurement is shifting beyond lowest tariffs towards dependable, dispatchable and affordable clean power, assessed through capacity value, balancing capability and system economics. Storage-backed renewable and hybrid projects can improve renewable utilisation, reduce variability and curtailment, and support peak demand. Higher renewable penetration also requires supportive storage policies, timely approvals, aligned intrastate transmission planning, stronger distribution infrastructure, and market mechanisms for ramping reserves, frequency response and fast-response balancing services.
August 13, 2026
Show AI Summary
Accredited Investor certification facilitates eligible investors' access to alternative investment products, lower thresholds and applicable regulatory flexibilities.
SEBI's Accredited Investor framework enables eligible investors and entities to obtain certification that may allow lower minimum investment thresholds for Portfolio Management Services, Alternative Investment Funds and other alternative investment products, along with applicable regulatory flexibilities. PMS Bazaar and NSDL Database Management Limited's Accreditation Agency facilitate end-to-end applications, subject to required documentation and prescribed payment. Assistance is available to individual investors and eligible clients of investment providers without additional platform, service or processing charges, while prescribed certification fees remain payable.
August 13, 2026
Show AI Summary
Manufacturing GVA growth under the revised national accounts series highlights stable sectoral contribution and resilience-focused industrial measures.
Manufacturing performance is assessed under the revised National Accounts Statistics series using 2022-23 as the base year. Manufacturing's share of total Gross Value Added at current prices remained broadly stable through 2025-26, and Manufacturing GVA at constant prices achieved a compounded annual growth rate of 10.88% from 2022-23 to 2025-26. Production Linked Incentive schemes, logistics and industrial-corridor measures, semiconductor initiatives, and MSME support seek to strengthen domestic manufacturing, diversify supply chains, reduce import dependence, and improve resilience.
August 13, 2026
Show AI Summary
Electronic inspection and certified copies expand digital access to judicial records while supporting efficient case management and reduced delays.
NCLT has launched e-Inspection and e-Certified Copy Services for faster and more convenient access to judicial records and certified copies by advocates, litigants and other stakeholders. The services support a technology-enabled Registry framework and transparent, efficient justice delivery. Pendency monitoring, workload redistribution, Special Benches, maximisation of court time, and registration and listing guidelines are intended to improve case management, optimise limited judicial resources and reduce avoidable delays.

News

Back

All News

Showing Results for :
Reset Filters
No Records Found

News

Back

All News

Showing Results for : Reset Filters
Customs, DGFT & SEZ

TAXATION OF SERVICES BASED ON A NEGATIVE LIST OF SERVICES CONCEPT PAPER FOR PUBLIC DEBATE .

August 29, 2011

Contents
Acts
Rules & Regulations
Plus +
Summary
Note

Note

-

Bookmark

Print

Print

TAXATION OF SERVICES BASED ON A NEGATIVE LIST OF SERVICES

CONCEPT PAPER FOR PUBLIC DEBATE

1.0 Background:

1.1 In the Parliament, while presenting the Union Budget 2011, the Finance Minister proposed that:

“Many experts have argued that it will be desirable to tax services based on a small negative list, so that many untapped sectors are brought into the tax net. Such an approach will be very conducive for a nationwide GST. I propose to initiate an informed public debate on the subject to help us finalize the approach to GST.”

1.2 Pursuant to the announcement made by the Honourable Finance Minister, it has become imperative to initiate an informed public debate on widening the tax base by introducing a negative list of services

2.0 What is a negative list?

2.1 To a lay person, not initiated into the rigors of tax policy, a negative list of services implies two things: firstly, a list of services which will not be subject to service tax; secondly, other than the services mentioned in the negative list, all other services will become taxable which fall within the definition of the ‘supply of services'. This can be contrasted from the present method of taxation that has detailed description for each taxable service and all other unspecified services are not liable to tax. The latter method of taxation is also referred to as taxation by way of a positive list.

2.2 The selective taxation of services by way of incremental additions over the years served well in the past in acclimatizing both the tax payers and tax administrators to the new levy. However, with considerable expansion of the list, the administrative challenge has multiplied manifold. Service tax has now gained considerable maturity and many practitioners of the subject believe that incremental approach to taxation is not suitable for providing a stable system for taxation of services that is at the threshold of getting subsumed into a comprehensive GST.

3.0 Contours of public debate:

3.1 Broadly the following questions can arise in a public debate on introduction of a negative list based comprehensive approach to taxation of services. Feedback based on these questions from all stakeholders can further enlighten Government's approach to this important tax reform initiative:

++ Negative vs positive list: should the country adopt a negative list? What will be the proper timing: at the time of GST or even earlier?

++ How to define ‘service', for the purpose of taxation?

++ What are the services which should be placed in the negative list?

++ How comprehensive the coverage should be while drawing the negative list? What should therefore be the policy on taxation of important sectors e.g. education, health, public services, charitable and NGOs, infrastructure etc.?

++ What are the likely revenue implications?

4.0 Negative vs Positive list

4.1 The issue that which of the two lists is more desirable can be argued both ways with each having its own pros and cons. Positive list has the advantage of definitiveness, which is an essential pre-requisite for a good taxation law. However this very advantage starts getting eroded as the number of services increase. The possibilities of overlaps amongst definitions lead to innumerable administrative issues resulting in litigation and higher compliance costs. Some of the definitions could be so wide that they lead to unintended taxation requiring either clarifications or exemptions.

4.2 On the other hand the fact that many services are outside the tax net invariably leads to unintended exemptions, thus keeping the tax base narrow with all the accompanying consequences. Such unintended exemptions at intermediate stages lead to breakage of the input tax chain adding costs for the tax-payers and end-users. This will be clear from the following illustration:

Situation 1: No exemption

 

Taxable Inputs

Output

Input tax credit

Output tax@ 10%

Net liability

Origin Suppliers

0

100

0

10

10

Service provider I

100

200

10

20

10

Service provider II

200

400

20

40

20

Total

 

 

 

 

40

Situation 2: With exemption

 

Taxable Inputs

Output

Input tax credit

Output tax@ 10%

Net liability

Origin Suppliers

0

100

0

10

10

Service provider I

100

200

10

exempted

0

Service provider II

200

400

0

40

40

Total

 

 

 

 

50

4.3 It is evident from the illustration that when the Service Provider I is kept outside the tax chain the effective tax on the total supply goes up from 40 to 50 as the taxes paid at the previous stages are not available as tax credit at the subsequent stage.

4.4 As the untaxed supplies are treated exempt for the purpose of input tax credit rules, taxes paid on the inputs used in their supplies are required to be reversed under the prescribed rules. This further adds complexities both for the tax-payers and the administrators.

4.5 Such exclusions also lead to distortion of economic neutrality across similar or substitute supplies e.g. road vs. rail transportation or discourage outsourcing by incentivizing self-supplies, and are thus not conducive to making the optimal choices in the economy. Moreover the one-time taxation of the service sector obviates the need for year-after-year incremental changes.

4.6 On the other hand there are significant advantages of positive list in so far it has already attained a certain level of awareness and stability in administration. The categorizations of services is also useful for a variety of purposes e.g. import and export rules, Cenvat Rules and Point of Taxation Rules or where ever any differential treatment is required to be given to any service as also for statistical purposes.

4.7 The proper timing for the launch of negative list can also be argued either way. GST will give the advantage of a wider constitutional mandate for comprehensive taxation of goods and services. Undoubtedly that will be far more conducive for the launch of taxation based on a negative list. On the other hand there are advantages in moving towards negative list at an earlier time in order to gain useful experience in its implementation and minimize the impact of the mammoth changes that GST may usher.

5.0 Definition of Service :

5.1 As the new concept envisages taxation of the whole, unless otherwise something is excluded, it is necessary to capture that universe such that it does not infringe upon either the powers to tax of another legislature in a specific area or taxes such areas as are subjected to like taxes as goods. To initiate a public debate and obtain feedback, a definition of ‘service' is proposed as follows:

5.2 A “service” means anything which does not constitute supply of goods, money or immovable property- and includes-

A. right to use an immovable property;

B. construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of certificate of completion by a competent authority;

C. temporary transfer or permitting the use or enjoyment of any intellectual property right;

D. obligation to refrain from an act, or to tolerate an act or a situation, or to do an act;

E. service in relation to lease or hire of goods; and

F. right to enter any premises- but excludes a supply-

A. by an employee to an employer in the course of or in relation to the employment of the person;

B. by a constitutional authority under the Indian Constitution or a member of an Indian legislature or a local self-government in that capacity;

C. that amounts to manufacture of excisable goods or is chargeable as part of the value of goods to a duty in terms of the provisions of Central Excise Act, 1944;

5.3 In the attempted definition, a supply of service is defined as ‘anything which does not constitute supply of goods, money or immovable property'. The key words are goods, money and immovable property. Tax will be imposed on supply of services. A supply is a transaction and transaction involves two persons. Transaction involving goods, money and immovable property is excluded from the meaning of supply of service. Inclusions and exclusions support and clarify the above definition of supply of services.

6.0 Exclusions :

6.1 Supplies of goods , money and immovable property are the principal exclusions, in the proposed scheme. The expression ‘goods' as defined in clause (7) of section 2 of the Sale of Goods Act, 1930, can continue to be part of the service tax framework as at present. According to the Sale of Goods Act, 1930:

“Goods” means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.

6.2 It is important to mention that supplies which are deemed to be sale of goods in terms of Article 366 (29A) of the Constitution in the case of specified contracts will stand excluded as goods. These relate to goods portion of the supplies in a works contract, contracts of hire purchase and catering. The remaining portion of the supply in the specified composite contracts shall be considered as supply of service. Under the proposed negative list approach, where supplies of services are bundled alongwith supply of goods in situations other than those stated in Article 366 of the constitution, nature of the transaction will have to be judged by what the Honorable Supreme Court has called the “dominant nature test” in the case of Bharat Sanchar Nigam Ltd. Vs UOI [2006(2) STR 161 (SC) para 43]. The test requires: “did the parties have in mind or intend separate rights arising out of the sale of goods. If there was no such intention there is no sale (of goods) even if the contract could be disintegrated.”

6.3 The expression “money” is meant to capture transactions where Indian legal tender is exchanged from one form to another.

6.4 The expression ‘Immovable property' as defined in clause 26 of section 3 of the General Clauses Act, 1897 can be borrowed to support the proposed scheme:

“Immovable property” shall include land, benefits arising out of land and things attached to the earth, or permanently fastened to anything attached to the earth.”

6.5 In addition to the above, certain exclusions are provided to clarify the concept of ‘supply of service'. For instance, it is provided in the definition of ‘supply of service' that, sale of immovable property in fully complete form i.e. after issuance of the completion certificate, will not be counted as supply of service. However, all agreements to sell a complex, building, civil structure or a part thereof to intending buyers, wholly or partly, where a part of the consideration is received before the completion certificate is obtained shall constitute service, as is the case even at present. Similarly, it is proposed that a transaction involving right to use immovable property e.g. renting shall constitute a supply of service.

6.6 A transaction takes place between two persons. Therefore self-supplies will not constitute a service. The word “ Person" shall include any company or association or body of inpiduals, whether incorporated or not (section 2(42) of the General Clauses Act, 1897) and hence services by or to unincorporated associations and joint ventures will constitute a valid transaction.

6.7 Supply of services by an employee to an employer in the course of or in relation to the employment of the person is an important exclusion. However any service rendered by an employee in another capacity will constitute a supply of service. Similar position is proposed in respect of constitutional functionaries, some of whom may not be strictly in the position of an employee, as also members of Union and State legislatures and local self-government.

6.8 Any supply that amounts to manufacture or is includible in the value of the goods under the Central Excise Act is also kept outside the purview of the definition of service as this is liable to Central Excise duty as goods.

7.0 Inclusions :

7.1 A number of specific entries have been specified in the inclusive portion to provide greater clarity to the new approach to taxation of services. R ight to use immovable property falls within the domain of services. Also temporary transfer or permitting the use or enjoyment of any intellectual property will constitute supply of service. The obligation to refrain from an act, or to tolerate an act or a situation, or to do an act will also constitute service. Delivery of goods by way of hire purchase or installments is declared by the Constitution to be deemed sale of goods. But services provided in relation to lease or hire of goods have been held to be a service [Association of Leasing & Financial Services Companies vs UOI]. Right to enter any premises e.g. museums; art galleries or botanical gardens will also constitute service.

7.2 To bring certainty and clarity in certain areas where goods and services aspects may overlap, it is proposed to empower the Central Government to specify certain supplies as supply of service or otherwise, whether in full or part. Services so declared will be taxed as a supply of service notwithstanding anything to the contrary. This is not meant to be unbridled power and shall operate within the existing legal restraints on the subject.

7.3 In the light of the discussions in the previous paragraph, supplies of electricity, power, heat, refrigeration and ventilation may be specified as not comprising supply of services. Sale of SIM card with talk time [Idea Mobile Communication Ltd Vs CCEC, Cochin], downloadable on-site software and similar supplies through the internet may be specified as services. Service element involved in the supplies in respect of works contracts, restaurants, outdoor catering may be subject to tax as services at the prescribed rates, so that goods portion falling within the taxation powers of state governments, will stand excluded.

8.0 Negative list of services :

8.1 An indicative negative list is given in the Annexure. This is only a proposition to initiate a discussion. While drawing the indicative negative list some of the considerations found relevant are as follows:

(i) Administrative considerations: taxation of Government, difficult to tax sectors e.g. margin-based financial services.

(ii) Under contractual obligations: Specified international bodies and diplomatic missions

(iii) Welfare considerations: welfare of vulnerable sections of society, essential education, public health; public transport, services by non-profit entities, religious services, promotion of art, culture and sports.

(iv) Economic considerations: transport of export goods, services meant for agriculture, animal husbandry and infrastructure development.

(v) Explicit activities in the nature of services, which are within the taxing powers of States: betting and lotteries, tolls.

8.2 Most of the services provided by government are provided without a specific charge to the recipient and thus shall not be liable to tax. However the other supplies could be classified as follows:

i. Where services are provided at market rates and compete with private entities;

ii. Where services are provided at concessional rates but compete with private entities;

iii. Where services are provided exclusively or predominantly by government.

8.3 When Government is engaged in providing services in purely commercial areas or where similar services are provided by private enterprise, it is necessary to provide equitable tax treatment. W hen government supplies compete with the supplies made by private enterprise, if tax is levied only on supplies made by private enterprise, it amounts to discrimination and economic distortions will be inevitable.

8.4 W here services are provided by Government or its extended agencies more or less exclusively many experts argue that such services should also be subjected to tax. The counter argument is that such taxation would lead to increase in administrative work load without commensurate increase in net revenue when the same amount can be collected by increased user charges. With increasing privatization and outsourcing the piding line between government functions for a fee or charge and somewhat similar functions elsewhere is diminishing. For example the driving licenses in many states are now issued by private bodies though the approval continues to be given by government agencies. It is thus proposed to confine negative list only to services provided in select few areas and the matter is left open at this stage for public debate as to what precise exclusions should be made.

8.5 Even though the definition of goods includes stocks and shares, the sale and purchase of securities and debts on a principal-to-principal basis is also separately excluded by a specific entry in the proposed negative list. This may require discussion whether mere exclusion at the definition stage of stocks and shares will capture all the various instruments that are sold and purchased on principal-to-principal basis in financial markets. However, services in relation to sale and purchase of securities e.g. stock broking will come under the tax net.

8.6 Renting of personal dwellings for the residential use of any person is commonly included in negative list in most parts of the world. Due to wide pergence in income levels in India a case is made for bringing opulent living within the tax net. A reasonably high threshold will ensure that the effect is felt largely by the very well to do sections of the society.

8.7 On the subject of taxation of health services, perse views have been expressed in the recent past. While appreciating that health services are absolutely essential for all persons, some tax policy experts do argue that only the basic or public health services should be kept in the negative list. All health and medical services other than these health services, particularly the high-end medical services provided by private enterprise, should be brought within the tax fold. Among other arguments they justify the same on grounds of the sanctity of the tax-chain so that taxes paid at the previous stage are allowed to be set off at the subsequent stages of consumption (in particular for the health insurance sector) and the need to use the resources so made available for upgrading the facilities for the poor in the public health system. Another model of taxation could be to exempt health care up to a decent threshold so as to confine it to large entities that are commonly accessed by persons with insurance cover or other affluent sections of society. Services provided by such establishments to needy and economically weaker sections could be exempted as per agreed criteria. Public hospitals could be kept outside the levy as they largely address the needs of the weaker sections. The issue thus requires a well-rounded debate on all the various aspects. For the moment two options are indicated but there can be many varied variants for the treatment of this sector.

8.8 Similar arguments are also made in respect of certain streams of education. Services provided by international schools and expenses recovered by certain educational institutions over and above the prescribed charges, including capitation fees or donations are areas that are often cited for the purpose of levy of service tax.

8.9 It is acknowledged that some of the areas specified in the proposed negative list require greater elaboration. However the same has not been attempted at this stage in order to obtain perse and unbiased views during the course of the public debate.

9. Revenue Impact

9.1 It is well known that nearly 57% of India GDP comes from services. After including construction, the contribution from services will come to about 63%. At current prices the contribution from services during 2010-11 comes to about Rs 50 lakh crore.

9.2 The national income statistics do not capture the break-up of the service sector in the manner it is being taxed or sought to be taxed. However some broad indications are available of the contribution of services from certain sectors. Based on these indications contribution from services that are proposed to be kept in the negative list e.g. trading of goods, transportation of passengers, education and health sectors as also portions of construction, real estate and financial sectors can be estimated. In addition to exclusions by way of negative list, export of services valued at about nearly US$ 13o billion at present will also remain exempt. The import of services meant for direct consumptions by inpiduals are at present not largely subjected to tax. Remaining services from abroad may not make any major net contribution to tax being available for credit set off.

9.3 On a rough estimate nearly 40% of the total services will come into the tax net as a result of the proposed negative list. However a large part of the informal sector would also remain outside the tax net due to the threshold exemption. This would leave only about 60% of the sector not covered by negative list actually available for tax payment. Thus the potential for effective taxation of services may be confined to about 20-25% of the service sector contribution. This is still a sizable number and will add significant numbers to the revenue though may not sound astounding as some sections believe it to be.

10.0 Conclusion:

10.1 For the purpose of operationalizing the proposed negative list, certain changes will be necessary in the current service tax framework, importantly in the rules relating to import and export of services and to a lesser extent Cenvat Credit Rules, 2004, Service Tax Rules, 1994 and Point of Taxation Rules, 2011.

10.2 Exemptions which are operational within the current positive list regime have not been discussed in this paper. It is possible that some of these may be retained by the Government of India in public interest and some others may be withdrawn as not necessary, being covered by the negative list. In this connection, remarks column of the annexure may be perused.

(This Concept Paper is placed in the public domain for the widest possible consultation, extensive debate and to seek views and feedback of all stakeholders. The Paper has been prepared by a team of officers with inputs from CII, FICCI, ASSOCHAM and PHDCI. Views expressed here do not reflect the position of the Government of India in any manner. Any comments, suggestions or feedback may be given by September 30, 2011 to Shri Shobhit Jain, OSD (TRU) at [email protected] , Tel: 011-23095590; fax: 011-23093037)

Annexure

Possible Negative List of Services



Sector

S. No.

Negative List

Remarks

1. By specified persons

 

 

1.

Notified services provided by:
a. Government* and Judiciary;
b. RBI; and
c. government regulatory bodies

List of these services or the principle for exclusions will be worked out based on the outcome of the debate

2.

Services provided by inpiduals to Government in relation to their representation on any council, commission or similar body set up by the Government

 

3.

Service by UN, international bodies, diplomatic missions under diplomatic and consular arrangements as per laid down conditions (details to be specified)

Services provided to such entities to remain exempt as at present.

2. Social welfare and public utilities

 

4.

Services provided by organizations registered as non-profit entities in matters relating to public and social welfare activities-excluding education and health (covered separately)-including charitable fund-raising events, sponsorships to charitable events and voluntary donations to charity

Public and social welfare activities will be suitably defined and may be restricted to specified fields only

5.

Funeral, burial, crematorium and mortuary services

 

3.Agriculture & animal husbandry

6.

Services directly used for growing, cultivation, harvesting of the agricultural produce, horticulture , animal husbandry, forestry, dairy, poultry farming and pisciculture (including renting of vacant land exclusively or predominantly for any such purpose)

Certain support services in relation to agriculture and allied activities may be separately exempted

4. Financial Sector

 

 

 

7.

Sale, purchase or acquisition of securities and debts on principal-to-principal basis

Acquisition of shares in lieu of services will be liable to tax

8.

Interest

 

9.

pidend on investments

 

10

Inter-bank sale and purchase of foreign currency

 

5.Transport

 

 

11

Transport of passengers by:

a) public transport buses on a point-to-point basis (except tourist buses) and stage-carriage basis;

b) public transport in ship or vessel of less than 15 net tonnage on a point-to-point basis;

d) by metered taxis or three-wheeler auto rickshaw plying within the precincts of a city

 

12

Transport of goods to a destination outside India by any means of transport

 

13

Supply of goods carriage to a person engaged in the business of transportation of goods

 

6. Construc-tion & Real Estate

 

14

Construction, works-contract, repair, alteration, renovation or restoration of:

a) roads, airports, railways, transport terminals, bridges, tunnels, dams, canals, irrigation and flood control waterworks including watershed development and water-bodies, water treatment plants and water supply pipelines;

b) buildings owned by Government, other than meant predominantly for industrial or commercial use, including government hospitals and educational institutions

c) residential building comprising of a single dwelling unit;

d) homeless shelter, orphanage, old-age home, rehabilitation & de-addiction centre, child day-care home or place of worship

 

15

Renting of personal dwelling for residential use of a person below a threshold (to be finalized after debate) and when used otherwise as a hotel, inn, guest house, club or campsite or similar accommodation

 

7. Education

16

Pre-school, school and recognized education** and vocational training recognized by NCVT except as capitation fee, donations or similar charges in relation to admission

 

8. Health

17

Option 1:

Services provided by a clinical establishment with a turnover below Rs 4 crore in the previous year

Option 2:

Hospital, medical care, diagnostic, para-medical services except in relation to preventive health check-up within the precincts of a clinical establishment, cosmetic or plastic surgery

Services to specified sections and by public hospitals may be exempted under option 1.

9. Others

18

Copyright services of original literary, dramatic, musical and artistic works

 

 

19

Services provided by independent journalists, PTI & UNI for providing news

 

 

20

Services provided by sportspersons, as a player, coach or referee/umpire and performing artists in that capacity (excluding as brand ambassadors)

 

 

21

Religious services provided by any person.

 

 

22

Services provided by a political party recognized by Election Commission of India

 

 

23

Services provided by a trade union to its members

 

 

24

Representational services provided by an advocate to inpiduals

 

 

25

National or international prize/award in recognition of achievement in the field of art, literature, science, sport, economics or public life

 

 

26

Tolls except services in relation to collection of tolls

 

 

27

Betting and gambling except services in relation to promoting, marketing or organizing games of chance, including lottery services

 

* Government means the Union, State and local self government but shall not include any entity established under the Companies Act 1956 or any other law for the time being in force.

** Recognized education means education leading to the award of a certificate or degree recognized by a body established by an Indian law.

Topics

Acts Income Tax