States against LNG under ‘declared goods'

| Updated on: Nov 28, 2011

Need time to give views on negative list of services

The Empowered Committee of State Finance Ministers has rejected the Centre's request for inclusion of liquefied natural gas (LNG) in the list of ‘declared goods'. Such a status would have brought down the State taxes uniformly to 4 per cent across the country.

Mr Sushil Modi, Chairman of the Empowered Committee, said, “More items should not be added to the list of declared goods.”

With this, any hope for granting ‘declared goods' status to aviation turbine fuel (ATF) or jet fuel has faded. Airlines have been putting pressure on the Government to bring down their fuel costs.

States are reluctant to do away with any petroleum product from the local tax net, as these contribute 22 per cent to their revenue. This could be one reason for not acceding to the Centre's demand.

The committee, in its meeting on Monday, also sought more time for giving its views on the negative list of services.

The Centre has brought out a revised concept paper for putting 22 kinds or group of services out of the service tax net.

Mr Modi said till now Maharashtra, Bihar and Madhya Pradesh have given their views on the concept paper, while the rest wanted some more time. These three States felt that some areas, such as restaurant, entertainment are taxed both as a ‘service' and ‘goods'.

The State Government levies value added tax (VAT) or entertainment tax, while the Centre charges service tax.

“There is a conflict. So, to get a comprehensive view, a Committee of Secretaries has been set up,” Mr Modi said. It will give its report by the end of next month. The Centre has asked all the stakeholders to give its views by December 15.

The Committee also deliberated upon compensation issues in lieu of reduction of central sales tax (CST). This tax is levied on inter-State trade. “Haryana, Delhi, West Bengal, Odisha, Tamil Nadu, Maharashtra and Gujarat were angry over non-payment of compensation. They also questioned reduction in the compensation amount on the basis of hike in the floor rate of VAT,” Mr Modi said.

The Committee also took the views of Petrofed and Wine Association over non-inclusion of petrol, diesel, jet fuel and alcohol. These associations have sought that the Constitution Amendment Bill should not mention non-inclusion.

Published on November 28, 2011

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