New service tax regime to make speed post, holidaying costlier

Speed post and express parcel service of post office, earnings of TV and theatre artists will come under the 12% service tax bracket from Sunday with the government embracing the new service tax regime based on negative list.

 From now, with the exception of 38 services, whichfigure in the negative list, all other activities would attract 12% tax.

Besides, air tickets and overseas holiday package bought from online portals would be subject to the levy.

Also tests like GMAT and GRE would get more expensive as the institutions which conduct these exams would be subject to tax. However, entrance tests of institutions such as IITs and IIMs will be exempted from the levy.

While private tuition providers will now be subject to service tax if their annual turnover exceeds Rs. 10 lakh, although the tax will not be levied on school, university education and approved vocational courses.

As per the negative list, services like metered taxis, auto rickshaws, betting, gambling, lottery, entry to amusement parks, transport of goods or passengers and electricity transmission or distribution by discoms have been kept in the negative list.

Other important services which will not attract the tax include funeral, burial, mutate services and transport of deceased.

However, rail freight and passenger fares are kept out of the ambit for the time being after railway minister Mukul Roy wrote to Prime Minister Manmohan Singh, who is now looking after the finance portfolio, requesting him not to introduce service tax on passenger fare and freight traffic from July 1.

The government has widened the definition of 'Services' to bring in more activities under the tax net. Till now, 119 services that come under 'positive list' are subject to the levy.

The switch-over to a negative list would help in smooth transition towards the Goods and Service Tax (GST) regime and would also expand the tax base. This is also expected to increase the Centre's Service Tax collection to Rs. 1.24 lakh crore in 2012-13, up from Rs. 97,000 crore in the last fiscal

Besides, services provided to the government, local authorities or a government authority for the repair and maintenance of an aircraft would also come in the negative list.

Also, services provided by advocates to other advocates and business entities up to a turnover of Rs. 10 lakh in the preceding financial year is exempt from service tax.

Services provided by way of public convenience such as provision of facilities of bathroom, washroom, urinals or toilets would be included in the negative list.

The other services which would be exempted from tax include auxiliary educational services and renting of immovable property by educational institutions in respect of education exempt from service tax.

Besides, services relating to works contract to a scheme under JNNURM or Rajiv Awas Yojana would also come under the negative list.

Source : Hindustan Times, July 2, 2012