Sources in finance ministry tell CNBC-TV18's Akanksha Sethi that the Union Budget will unveil a negative list for service tax.
The government is been working on the idea of negative list for service tax for quite some time now. CNBC-TV18 now learns from sources in the finance ministry that work is on full force and they are working out the mechanisms However, it may not be possible to bring it in from the April 1 because they will have to give industry time for registrations etc, and hence, they are aiming for a timeline of about May or June from when to bring this in.
This is going to be a key change because not only will it help the government mobilise about Rs 20,000 crore of additional revenue. It will be crucial next year to meet the 4.1% fiscal deficit target and counter a possible slow down in growth.
Besides that, this is something that will pave the way for GST.
The government proposes to define services as anything that does not constitute the supply of goods, money or immovable property. Therefore, everything apart from that will be considered a service and in that there will be a negative list and it is a significant list of about 24-25 items which will not be taxed and apart from that everything else that constitutes the service will be taxed.
Now, industry was not too keen on this because they felt that until Goods and Services Tax (GST) comes in, and they can actually claim a setoff for this, there is no point in bringing in pervasive service tax because it will actually increase input cost instead of reducing them.
The industry had given the suggestion that to begin with instead of a 10.33% rate the government should only levy only 1-2% rate on all the other services. But that's a suggestion that the government has not taken into account and it is going to go ahead with the service tax as it has been proposed in the revised concept paper, which means that education, healthcare will be left out and all the other services are going to be taxed.
Source: MONEYCONTROL
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