The Hindu Business Line : Bring education cess under Cenvat: Chamber

THE PHD Chamber of Commerce and Industry (PHDCCI) has urged the Finance Ministry to evolve a mechanism to enable those assessees who for any reason have not been able to conform to service tax rules to graduate to the service tax mainstream without the levy of any penalty.

At present, stiff penalties are levied for non-payment or short-payment of service tax to the exchequer.

Further, the chamber has suggested that the proposed education cess should be "cenvatable" if imposed on any indirect taxes.

The Common Minimum Programme of the United Progressive Alliance had mentioned a cess on all central taxes to finance universal access to primary education.

PHDCCI officials, who met a senior Central Board of Excise and Customs (CBEC) official here, have also suggested that "cross-VATability" should be permitted between Cenvat and service tax.

Simply put, a manufacturer paying service tax on input services (telephones, insurance etc) should be able to adjust this service tax against the cenvat duty payable on his finished goods.

They also held that the industry must be given at least six months time to prepare for the transition to a value-added tax (VAT)regime that would replace the sales tax.

"All the necessary VAT-related legislations and rules should be ready much before (at least six months) the date of implementation so that industry can prepare themselves for the new regime," a PHDCCI official said.

Even as broad consensus exists among most States for implementation of VAT from April 1, 2005, PHDCCI has stressed the need for a roadmap to be announced in the budget speech of the Union Finance Minister.

"There has to be clarity on how the central sales tax would be phased out and in what timeframe. CST should not co-exist with VAT regime", the chamber official said.

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