Changes in Negative List of Service Tax as per Budget 2016

In Budget 2016, the Finance Minister proposed certain changes to the existing negative list i.e. a list of such services which are exempt from service tax.

Let us look at these proposals in brief.

1. As per Section 66D(l), services by way of :

(i) pre-school education and education up to higher secondary school or equivalent;

(ii) education as a part of a curriculum for obtaining a qualification recognised by any law for       the time being in force;

(iii) education as a part of an approved vocational education course;

were exempt from service tax.

These services are proposed that these services will be removed from this list.

However, in the mega-exemption notification (Notification No. 25/2012), services provided by the Indian Institutes of Management, as per the guidelines of the Central Government, to their students in some of the courses conducted were inserted. (Clause ii in Notification No. 9/2016-Service Tax dated 01^st March 2016)

2. As per Section 66D(o)(i), service of transportation of passengers, with or without accompanied belongings, by a stage carriage was exempt from service tax. The latest proposal seeks to remove this service from the negative list and tax it with effect from 1^st June 2016.

However, such service of transportation provided by a non air-conditioned stage carriage will continue to be exempt. If the stage carriage is air-conditioned, then service tax will be leviable. (Clause ix in Notification No. 9/2016-Service Tax dated 01^st March 2016)

For your information, stage carriage means a motor vehicle which is constructed to carry more than six passengers excluding the driver for hire or reward (i.e. for specific charges) at separate fares paid by the individual passengers, either for the whole journey or for stages of the journey (As per Motor Vehicles Act, 1988)

3. As per Section 66D(p)(ii), services by way of transportation of goods by an aircraft or a vessel from a place outside India to the first customs station of landing in India were exempt from service tax. This service is also proposed to be removed from the negative list and tax it with effect from 1^st June 2016.

However, a new entry No. 53 has been inserted in the mega-exemption notification (Clause xiii in Notification No. 9/2016-Service Tax dated 01^st March 2016)  to include services by way of transportation of goods by an aircraft from a place outside India up to the customs station of clearance in India with effect from 1^st March 2016. Hence, services provided for transportation by aircraft will continue to be exempt but provided by shipping companies will be taxable.