New Delhi: 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, Mr S.K. Goel said today at an ASSOCHAM-CBEC event held in New Delhi today.

“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 on ‘Impact of Budgetary Changes on Service Tax-Law & Procedure’ jointly organized by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) and CBEC.

“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 Mr 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 Mr Goel.

"We will ascertain the amount of records and documents and recreate the files that have been destroyed," said Mr Goel while responding to a media query vis-a-vis a fire that broke out in room number 14 and 15 of customs and investigation departments of the Finance Ministry's North Block office in New Delhi early this morning.

“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.,” said Mr Rajkumar Dhoot, MP and president, ASSOCHAM. “The government has taken certain mandatory bold steps and initiatives to make the levy of service tax trade friendly and hassle-free.”

“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,” said the ASSOCHAM chief highlighting the views of trade and industry.

While sharing his views on the negative list for service tax, Mr. V K Garg, joint secretary, (TRU II), CBEC mentioned 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, Mr J.K. Mittal, co-chairman of ASSOCHAM’s national council on indirect taxes 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.”

Mr Gautam  Bhattacharya, commissioner-Service Tax, Delhi also shared his views on the subject.