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Negative List of Services

Negative List of Services

Service tax is levied at 14%, on the value of all services other than those services specified in “Negative list of services”, which is provided or agreed to be provided in the taxable territory by one person to another person.

Negative list of services specifies the list of services which is outside the ambit of service tax liability. i.e. service tax exemption list. Section 66 D of the Finance Act, 1994 specifies the Negative List of Services.

As per section 66 D of the Finance Act, 1994 the Negative List of Services shall comprise of the following:

1. Services by Government or Local Authority:

Services provided by government or local authority are exempted from service tax. However, the following services provided by government are not covered in negative list of services.

A. Services provided by the department of posts, to a person other than government ,by way of:

i) Speed post

ii)Express parcel post

iii)Life insurance services

iv)Agency services.

B. Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport.

C. Transport of goods or passengers

D. Any services provided to business entities.

Therefore, we can conclude that, all services provided by government or local authority is covered by negative list of services. But services provided by:

PPost office by way of:

S- Speed Post

A- Agency services

L- Life Insurance

E- Express parcel post are taxable.

AAircraft or vessel services, inside or outside the precincts of a port or airport.
TTransport of passengers and goods
SServices provided to business entity

So, what is government ?

Sec 65B(26A) defines “government” as “the department of Central Government, a State Government and its departments and a union territory and its departments, but shall not include any entity, whether created by a statute or otherwise.

Examples:

  1. Basic mail services like post cards, book posts, inland letters are not taxable.
  2. Transfers of money through money orders are not taxable.

2. Services by Reserve Bank of India

Any services provided by Reserve Bank of India (also known as RBI) is covered under negative list. Therefore, services provided to RBI are taxable.

It is very important to note that any services provided to RBI are not included in negative list and hence would be taxable subject to exemptions given to them.

3. Services by Foreign Diplomatic Mission

Service provided by a foreign diplomatic mission in India, are covered under negative list and hence not taxable.

Diplomatic mission means group of people of one state, present in the other state, to represent sending state organisation officially in the receiving state.

4. Services related to agriculture or agricultural produce

Services relating to agriculture or agricultural produce by way of:

i) Agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection, or testing.

ii)Supply of farm labour.

iii)Renting or leasing of agro machinery or vacant land.

iv)Loading, unloading, packing, storage or warehousing of agricultural produce.

v)Agricultural extension services.

vi)Services provided by an Agricultural produce marketing committee (also known as APMC) or board or services provided by a commission agent for sale or purchase of agricultural produce.

Examples:

  1. Supply of farm labour is exempt from tax.
  2. Warehousing of wheat biscuits is not an agricultural produce and hence taxable.
  3. Sale of rice on commission basis, is taxable (as rice is not an agricultural produce).

5. Trading of goods

Trading of goods has been covered under negative list. Hence, it would qualify as exempted service.

As per section 65B(25), “Goods” means every kind of moveable property other than auctionable claim and money; and includes stocks and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be served before sale or under a contract of sale.

6. Process amounting to manufacture

Services by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption are exempted from service tax.

Sec 65B (40) of the Finance Act, 1994 defines “Process amounting to manufacture of production of goods” as a process on which duties of excise are leviable under section 3 of the Central Excise Act, 1944 or the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 or a process amounting to manufacture of opium, Indian hemp and other drugs on which duties of excise are leviable.

Examples:

  1. Manufacture of herbal cosmetics which is liable to excise duty are included in negative list and hence not taxable.
  2. Manufacture of alcoholic drinks, which is liable to excise duty under state excise acts are not covered in negative list and hence taxable.

7. Selling of space for advertisement in print media

Selling of space for advertisement in print media is included in the negative list of services and hence not taxable.

“Print media”, means books as defined in Press and registration of books act, 1867, but does not include business directories, yellow pages and trade catalogues which are primarily meant for commercial purpose. “Newspapers” are defined in Press and registration of books act.

Therefore, we can conclude that advertisement in radio, television are taxable. Advertisement in newspapers are exempt.

Examples:

  1. Advertisement in yellow pages, are taxable.

8. Access to road or bridge

Service by way of access to:

1)Road (national high ways, state high ways) or

2) Bridge

on payment of toll charges is included in negative list. This implies that service tax is not leviable on service by way of access to road or bridge.

9. Transmission or distribution of electricity

Transmission or distribution of electricity by an electricity transmission or distribution utility are exempted from service tax.

Electricity transmission or distribution utility means, the central electricity authority, state electricity board, the central transmission utility, a state transmission authority notified under electricity act, a distribution or transmission licencee and any other entity entrusted by such functions by state or central government.

10. Renting of residential dwelling

Services provided by way of renting of residential dwelling for use as residential purpose is outside the ambit of service tax. So, if the residential dwelling is provided on rent for use for commercial purpose then it will be liable to service tax.

Therefore we can conclude that,

A residential house taken on rent and used for commercial purpose or non residential purpose are not covered in negative list of services and hence taxable.

Examples:

  1. House taken on rent, and the same is used as a lodge- The said service is not covered in negative list as it is used for commercial purpose and hence taxable.
  2. Renting of hotel room- The said service is not covered in negative list, as hotel room is not a residential dwelling and hence taxable.

11. Services by Banks or Financial Institutions

Services provided by the banks or financial institutions by way of:

1)Extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount.

2)Inter se sale or purchase of foreign currency amongst banks or authorized dealers of foreign exchange or amongst banks and such dealers.

Therefore, any services in relation to conversion of money from one denomination to another, carried out by banks are exempt. If such activity is carried out by any other person, then it would be liable to tax.

Examples:

  1. Loan processing fee is liable to service tax as it is not covered in negative list.

12. Transport of passengers

In the first point, we understood that transportation services provided by government are excluded from negative list, which means that they are liable to service tax. Now, let us understand what type of transportation services are covered in negative list.

Services of transportation of passengers, with or without accompanied belongings by:

1)Railways (other than first class and AC class).

2)Metro, monorail or tramway.

3) Inland waterways.

4) Public transport in vessel between the places located in India (other than predominantly for tourism purpose).

5) Metered cabs or Auto rickshaws.

Examples:

  1. Services of transportation of passengers from Kolkata to Port Blair are covered in negative list entry.
  2. Transfer of passengers in general class, sleeper class or second class in railways are not taxable.

13. Transportation of goods

Services by way of transportation of goods by:

1)Road (except services of GTA or Courier agency).

2)Inland waterways.

are covered in negative list of services, and hence they are outside the ambit of service tax.

14. Funeral, Burial, Crematorium or Mortuary services

Funeral, burial, crematorium or mortuary services provided included services provided by way of transportation of deceased are outside the ambit of service tax.

Negative List of Services

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