The Hindu Business Line : Bill on service tax introduced in LS

A BILL seeking to amend the Constitution to provide tax on services as specific entry in the Union List and evolve principles for determining the modalities of levying service tax by the Union Government and collection of the proceeds by the Central and State Governments was introduced in the Lok Sabha today.

According to the statement of objects and reasons of the Constitution (Ninety-fifth Amendment) Bill, 2003, the item relating to "taxes on services" is not specifically mentioned currently in any entry either in the Union List or in the State List of the Seventh Schedule of the Constitution.

As Parliament has the exclusive power to make laws with respect to entry 97 of the Union List for any matter not enumerated in List II or List III including any tax not mentioned in either of those lists, the Central Government has periodically taxed certain services at the rate of five per cent ad valorem in exercise of this power in the recent past. In 2003-04, this service tax has been hiked from five to eight per cent with additional 10 services being brought under the tax net.

The States have taken a unanimous view to replace their extant sales tax system with the system of value-added tax (VAT) from April 1, 2003. In this context, with a view to widening their tax base, the States have suggested that they should be enabled to collect an appropriate tax on services.

The "service" sector accounted for 48.5 per cent of the country's gross domestic product (GDP) in the financial year 2000-01. The role of this sector in the economy is quite significant and expert committees set up by the Central Government have repeatedly recommended taxation of services.

On the basis of the deliberations between the State Government and in view of the recommendations of various expert committees, it is proposed to suitably amend the Constitution to provide, among others, (i) tax on services as a specific entry in the Union List, (ii) insertion of a new article, viz., article 268A and (iii) consequential amendment to article 270 to enable Parliament to formulate by law principles for determining the modalities of levying the said tax by the Central Government and collection of the proceeds thereof by the Central Government and the States.

The proposed amendment would augment revenues of the States in accordance with the proposed law and eventually include services within the purview of State-level VAT.

Article E-Mail :: Comment :: Syndication

Stories in this Section
UNEP ties up with banks to boost solar home systems

Citric acid imports brought under dumping duty

Jaswant's just a click away

Asbestos cement producers resent `vilified campaigns'

Kerala: Bill to prevent defacement of places

Sand turns a scarce commodity

Germany keen to boost trade ties

Discussion on bio-larvicide put off

It's a good innings for hotels too

High land prices a hurdle for Mangalore SEZ plan

Goshree project: March to HLL premises planned