States to Centre: Make good sales tax loss or hike levy to 4%

Our Bureau New Delhi | Updated on March 12, 2018


Finalise 35 services for negative list

Hit by a falling share of revenue from the reduced Central Sales Tax (CST) kitty and a delayed Goods and Services Tax (GST) roll-out, the States have asked the Centre to either compensate them adequately for their revenue loss due to reduction in CST or increase the levy to the earlier rate of 4 per cent.

If the States have their way, then services provided by beauty parlours, health and fitness centres, dry cleaning services, outdoor catering services, marriage halls, pandal and shamiyana services may be exempted from service tax under GST regime

The Empowered Committee of States' Finance Ministers, at its meeting on Saturday, finalised a list of 35 services to be recommended to the Centre for inclusion in the negative list.

The Centre has proposed that any service or group of services featured in the negative list will not attract service tax.

Mr Sushil Kumar Modi, Chairman of the Empowered Committee, said: “The Empowered Committee is in favour of one negative list which can be implemented from April 1. Under the Seventh schedule, List II, the States have a right to tax these services and there is an overlap by the Centre and the States. ”

The States' list also includes services supplied by hotels, lodges, house boats or guest houses “by whatever name called” as a part of or incidental to the provision of accommodation on a daily basis to be exempted from service tax. It also seeks ambulance services to be exempted from service tax.

Though the list of 35 services does include services which are part of the “Revised Concept Paper on Taxation of Services based on Negative List”, made public by the Finance Ministry in November last year, the States want this to be expanded.

Mr Modi said: “If the Union Government does not release compensation then it should revert to the CST levy of 4 per cent from the present 2 per cent level,” Although CST is levied by the Centre, the revenue goes to the State from which movement of goods commences.

Plea to lift cap on professional tax

The Empowered Committee of State Finance Ministers has asked the Centre to remove the ceiling on professional tax. The Committee has sought a Constitutional amendment for this.

According to Article 276 of the Constitution, “The total amount payable in respect of any one person to the State or to any one municipality, district board, local board or other local authorities in the State by way of taxes on professionals, trades, calling and employment shall not exceed Rs 2,500 per annum.”

The Committee says that the ceiling on Professional Tax was last fixed in 1998. Even the 13th Finance Commission had clearly mentioned that the maximum limit on professional tax should be raised from the present value. The Committee feels that prescribing a ceiling on Professional Tax in the Constitution is not necessary.


Published on March 03, 2012

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