Finance minister Pranab Mukherjee today announced an expanded negative list for service tax, making all services except those mentioned in the negative list or otherwise exempted taxable.
The release of the guidance paper on the new approach marks the end of the positive list-based selective approach to taxation of services, which is in vogue since 1994.
The new approach to taxation of services is intended to take the country and the economy a step closer towards the introduction of Goods and Service Tax (GST), Mukherjee said while releasing the paper.
''More than as a revenue garnering measure, negative list is expected to make the administration of the tax simple, both for the department as well as the taxpayers, reduce litigation and usher a regime much closer to our eventual goal of Goods and Services Tax,'' he said.
The new negative list and some other minor changes will take the total number of exemptions to 38 from the existing 34, the finance minister said.
Under the new list, advocates with a turnover of up to Rs10 lakh, companies engaged in construction of metro projects, law firms, and entities providing public conveniences will not have to pay 12 per cent service tax.