States Get Go-Ahead For Tax On 25 Services

The Union government has accorded an in-principle clearance to state governments for taxing 25 services, as compensation for possible loss of revenue because of the impending phasing out of central sales tax (CST) following application of VAT in the country from April 2002.

A majority of these services would be local in nature, but some pan-India services would also be included, a government official said. The Centre, in the long run, is likely to allow states to levy tax on all services, other than financial services, telecommunications, postal communication and transportation of goods by air, sea and rail, he said.

List of services to be taxed is being worked upon and a uniform rate of tax would be levied for the same commodities across all states, he said. The power to levy tax on services is not mentioned either in the Union list or the the state list in the VII Schedule of the Constitution.

However, Entry 97 in the Union List empowers the Centre to levy any tax not mentioned in the state or the concurrent lists.