Give us power to levy tax on services: States to Pranab

New Delhi, Jan 19 (PTI) States today asked FinanceMinister Pranab Mukherjee to allow them to levy taxes on 33services as a first step for countrywide roll-out of Goods andServices Tax (GST).

"33 services should be given to the states to impose taxin this Budget. Almost all the states have this view," HaryanaFinance Minister Ajay Singh Yadav said after pre-Budgetconsultations with Union Finance Minister Pranab Mukherjee.

Currently, the Centre cannot impose tax beyondmanufacturing activities and states do not have the power tolevy tax on services.

However, after GST is implemented, both the Centre andthe states will have the power to levy taxes on goods andservices.

Bihar Deputy Chief Minister and Finance Minister SushilModi said to prepare for implementation of GST, states shouldbe permitted to collect and levy the appropriate tax onservices, which is now in the exclusive domain of the centralgovernment.

"Such an exercise would serve as a preparatory step andprovide the states with administrative structure experience oftaxing services before implementing GST," he said.

Another participant in the meeting, Chhattisgarh RevenueMinister Amar Agrawal said, "It will take some time toimplement GST, so the states should be given a chance tocollect service tax in the Budget on an experimental basis."

Once implemented, GST will subsume indirect taxes likeexcise duty and service tax at the central level and VAT onthe state front, besides other local levies.

The Centre has proposed a three-tier GST structure. Asper the proposal, GST will be levied at two rates on goods --a concessional 6 per cent on essential items and 10 per centfor others -- while services will attract 8 per cent GST.

These will be collected by both the Centre and the states.

The original deadline of April 1, 2010, for roll-out ofGST has already been missed and the Centre has said it willmake efforts to roll it out from April 1, 2011. However, dueto the lack of consensus between the Centre and states on theissue, it is likely this target will also be missed.

The proposal for roll-out of GST, touted as the mostsignificant indirect tax reform since the introduction ofstate-level VAT, has been hanging fire on account ofpersisting differences between the Centre and states on theGST Constitution Amendment Bill.

Amendment of the Constitution is required to enable theCentre to impose tax on activities other than manufacturingand for the states to levy service tax, under the GST regime.