New Delhi: It was but a matter of time before service
tax became a matter of conflict between state and central
governments. States are now demanding an equal share in
the proceeds from service tax currently being levied and
collected by the centre.
From
the budget of 2004 service tax is being levied on 70 different
services at the rate of 10.2 per cent and 29.5 per cent
of the revenue collections pass to the States.
Asim
Dasgupta the West Bengal finance minister and chairman
of the ''empowered committee of state finance ministers
on value added tax'' told newspersons at the end of the
first conference of state finance ministers, "All
States are firm in their suggestion that the proceeds
of service tax levied now by the centre should be shared
on a 50-50 basis between the centre and the states,"
he said.
The
finance ministry had prepared a proposal in the draft
Service Tax Bill in which services were clubbed under
four categories for the purpose of taxation. The states
rejected the proposal.
The
proposal contained a negative list (services on which
no tax can be levied), a central list (on which only the
centre can levy, collect and appropriate service tax),
a state list (on which states have exclusive monopoly)
and a shared list (services that both the centre and states
can tax).
The
states are demanding that there should be three lists
of services: an exclusive state list, a shared list and
a negative list. They say that while the centre can levy
tax on the shared list services, however, it will have
to transfer 50 per cent of the proceeds from these to
the states.
The
centre has budgeted service tax collections during the
current fiscal at Rs 14,150 crore, of which the main contributors
are telephones (Rs 3,518 crore), insurance (Rs 1,278 crore),
banking and other financial services (Rs 377 crore), port
services (Rs 441 crore) and brokerage (Rs 307 crore).
The states are also complaining
that the centre is keen on taxing the `cream'' among services,
while leaving the less-remunerative services to
the states.
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