Govt moots list to define all services taxed under GST     

The Center has proposed that there should be a positive list of services that would be taxed under the new Goods and Services Tax (GST) structure, even as experts say the move will give rise to a bout of litigation and will create uncertainty in the new indirect tax regime. The suggestion has been sent to the Empowered Committee of State Finance Ministers, official sources told The Indian Express. A positive list is one that defines all services that would be taxed under the GST while a negative list is the one that elaborates upon the services that would be out of the GST purview.

Internationally, the practice so far has been to maintain a negative list of services and goods on the argument that it is much easier to monitor and administer such a list. Though few countries do have a positive list. The Center, the sources said, has argued that the services have been fully classified only over the last 2-3 years, which explains the adoption of a negative list by most of the countries. However, now that the services have been classified, it would be better to have a positive list to identify the taxable services.

The move is contrary to that of the EC, which has been maintaining the stand for a negative list of services. The sources said that the states are inexperienced in the area of the service tax and a positive list will make things easier for them.

However, the experts say GST should be applied to a comprehensive list of goods and services and a positive list would defeat the purpose. “A positive list would be much complex and much more longer. The length of the list would be a worry and there would be uncertainty and confusion. But in negative list, in case of confusion, the service would still be taxable as it would not in the negative list,” Satya Poddar, partner Ernst and Young said.

Poddar said it is desirable to have a broad service base to tax, which would not be possible with a positive list and a wide variety of services would be left out in such a list. Secondly, as such the number of pending dispute cases in service tax is very large and the positive list is likely to add to it.

Also, the Task Force of the Thirteenth Finance Commission has in its report recommended a negative list specifying the list of services which should be exempt from the service tax net including public services of union, state and local governments, service transaction between an employer and employee, educational and health services provided by non-government schools, college and agencies.