State FMs Nod to Negative GST List

All items included in the Constitutions Schedule II should be in the list, states say

A panel of state finance ministers has approved imposition of service tax based on a negative list of services, a move that will help the Center widen its tax base. "The Empowered Committee of State Finance Ministers on Goods and Services Tax has agreed in-principle to the concept of negative list, said Sushil Kumar Modi, deputy chief minister of Bihar and chairman of the panel. The panel said the Center could prepare the negative list and implement it from the next financial year. A negative list based on service tax represents a fundamental change in India's approach to taxation in services, which are at present taxed on the principle of positive list. The negative list concept is practised globally and is proposed to be introduced in India as part of the Goods and Services Tax (GST) regime. The GST seeks to replace indirect taxes, such as central excise duty and services tax, and state taxes, such as value-added tax, entry tax and purchase tax, with a neat single levy. The panel has suggested that all the items mentioned in the Constitutions Schedule II, such as entertainment, should be included in the negative list to ensure that the Center cannot impose tax on them. The panel also deliberated on defining 'services' and felt that all kinds of economic activities, barring goods, money and immovable property, should be considered as part of the services, Modi said. The negative list proposed by the Center includes services like funeral, burial and mortuary agencies, interest paid on deposits by banks, dividend on investments and travel on public transport. Modi said service tax is imposed on 120 services at present and hoped that the negative list will help in further widening the tax base. He said a Parliamentary panel was examining the Constitutional amendment required to implement GST. The panel also demanded that the upper limit of.2,500 per year imposed by the Constitution on professional tax should be waived off.

Economic Times, New Delhi, 10-01-2012