4 July 2012


If the rise in prices was not hurting enough, the change in service tax regime will. Effective today, almost all services that we use will be subject to 12% service tax. Only a few on the negative list and the exempt list have been spared. 

And of course the services offered by the unorganized sector remain unaffected. Some see the changeover as a more efficient way of administering the tax. In fact, India Inc has been in favour of a negative list of services that will not be taxed instead of a positive list which is expanded every year to tax more services. 

It is also seen as a step forward towards a comprehensive Goods and Services Tax regime. ET Magazine spoke to tax experts to put together a list of new services on which you will be paying tax. 

Impact on Consumers 

1) Speed Posts, Express Parcels 
Private couriers were subject to service tax since 1996 but speed post and express parcel service of the post office were spared. That changes from today. Premium postal services and life insurance provided by the post office will attract 12% service tax. Basic postal services, money orders, savings accounts, pension payments, etc remain exempt. 

2) First Class & Air-Conditioned Class Travel By Railways 
3) Travel & Holidays Bought From Online Portals 
4) GMAT, GRE Tests 
5) Passport & Visa Services 
6) Money Changing 
7) Mutual Funds Exit Loads 
8. Actors, Singers & Other Performers 
9. Attending Conferences/Seminars 
10) Personalised Services, Fashion Designers 

Impact on Companies: 
1) Independent directors 
2) Brand Ambassadors 
3) Non-compete fees 
4) Employee retention 
5) Not-for-profit sector 

What is a service? 
Service is any activity carried out by a person or entity for another for consideration. Effectively, anything which is not a sale of good or an immovable property is a service.

Are all services to be taxed? 
No. The government has put out an exempt list and a negative list. Any service that is included in either of these lists will not be taxed.

Services not taxed 
These include services of sub-brokers, mutual fund agents and distributors, business correspondents of banks, etc. 17 services are included in the negative list and 39 services in the mega exemption list. Services provided by governments and local authorities will not be taxed on the whole. 

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