'Service tax on rail freight applicable from July 1'

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SME Times News Bureau | 08 Jun, 2012
Going ahead with its budget proposal of for imposition of service tax on rail freight, the ministry of finance will impose 12.5 per cent service tax on rail freight from July 1 onwards, Central Board of Excise and Customs (CBEC) chairman S.K. Goel said Thursday.

"The service tax will be applicable on 30 per cent of value of input goods and services and will not fuel inflation," said the CBEC chairman while addressing a conference in New Delhi.

"The negative list for service tax must be seen in the right perspective and not as a tool for finance ministry to garner additional revenue," said Goel while sharing his views on the negative list approach which will be effective from July 1. "Implementation of the negative list is a significant exercise to widen the service tax net and is aimed at curbing the cascading effect of indirect taxes."

"The industry at large must not ask for sector specific exemptions as a constructive approach is a pre-requisite for a shift to the negative list format which is to pave way for smooth implementation of the goods and services tax (GST)," said Goel.

Commenting on the negative list for service tax, ASSOCHAM president Rajkumar Dhoot said, "Negative list of services and place of provision of services rules, 2012 will bring desired results and will further facilitate the interests of India Inc.,"

"The government has taken certain mandatory bold steps and initiatives to make the levy of service tax trade friendly and hassle-free," he said, adding that changes regarding the reverse charge on sharing basis for three services may lead to the litigations, thus, the government should take appropriate steps to smoothen the implementation of such a proposal.

CBEC joint secretary (TRU II) V K Garg said that service tax excludes specified activities similar to employee like members of legislations & local bodies, person holding constitutional positions and Courts and tribunals. He also said that new services include construction sector/ real estate, entertainment / port sector, transport sector, business and miscellaneous.

Raking up the issues under reverse charge on sharing basis on three services, ASSOCHAM’s national council on indirect taxes co-chairman J.K. Mittal said, "The government should clarify whether the exemption related to the small scale service providers would be available to the recipient of services and also whether the service recipient would be entitled to the CENVAT credit paid by him as well as by the service provider."

"It should also be clarified as to whether the department would insist for the reconciliation of the payment of tax on the same very transaction by the service provider and the recipient," he added.