Concept paper on GST seeks switch to ‘negative list’ model

The union finance ministry today released a concept paper on the proposed goods and services tax (GST), which seeks to replace the current plethora of indirect taxes with single-window taxation – expected to be around the level of 16 per cent.

The paper seeks to follow the 'negative list' model prevalent in most countries, which is oriented on services that would be outside the tax net, rather than the 'positive list' method followed by India, which focuses on services that are to be included.

The ministry has sought reactions to its draft from all stakeholders.

While releasing the concept note, the finance ministry said this is a preliminary exercise. "The negative list is made keeping in view a variety of considerations - for example, administrative, contractual obligations, difficulty to tax certain activities for want of ascertainable taxable value of each transaction, or a number of socio-economic considerations as well as Indian constitutional limits," the paper said. 

Along with the negative list the government has also sought to define services for the first time. Anything not classified as goods, money or immovable property will be treated as a service, the concept paper says. The idea is to tax everything that is not on the negative list.

The paper suggests 27 services to be left out of the tax net, including fund-raising by political parties recognised by the Election Commission, interest paid on deposits by banks, dividend on investments, public road transport, and funeral and burial agencies.