VAT’s THE WAY STATES REVENUE UP 25% IN ’06-07

Hotel stay, power, legal advisory, amusement & recreation among 44 services likely to come under states’ tax net this fiscal

LOOSEN your purse strings. YOU may have to pay more for a host of new services like hotel, motel and lodging, electricity transmission and distribution, legal advisory amusement and recreational services. States are planning to bring some of the 44 new services, given to them as a part of the Centre’s central sales tax phase-out compensation package, under the tax net this fiscal itself. The states have also decided to impose 12.5% value added tax (VAT) on tobacco items. “We will take a final decision on May 5 as to which services out of the 44 new services should be brought under tax net. These services would be brought under tax net this fiscal itself,” chairman of the empowered committee (EC) of state finance ministers, Asim Dasgupta said on Saturday. He said that the Centre, in the first year, would collect service tax on the services given to states. Within this transition period, states would set up their service tax collection machinery and then collect tax on their own on all 77 services. As a part of the compensation package, the Centre had agreed to transfer 77 services to states, allowed them to impose VAT on tobacco products and abolish form D, which allows government departments to purchase goods from other states at a lower rate of 4% CST. Mr Dasgupta said that the meeting also reviewed the phasing out of CST from April 1. “We reviewed the phasing out of CST. It was also decided that the state would levy VAT on tobacco items at 12.5%, excluding biris, tobacco leaves and tobacco leaves meant for biris,” he said. Asked if the states proposed to increase the VAT rate next fiscal, he said the states were not keen to do so and no final decision had been taken on whether it would be hiked in the fiscal after that. On the proposed unified goods and service tax regime, he said the Centre had asked the empowered committee to prepare a roadmap for consultation with it. The committee also decided to set up a joint working group which would work on it and report back to EC, he added. He said the meeting further reviewed
the growth in revenues of VAT-implementing states. Mr Dasgupta said VAT revenues of states had grown by over 25 % in 2006-07, but did not give out the figures.

Courtesy: EconomicTimes