Centre to move service tax amendment

NEW DELHI: The political uncertainty on implementation of value added tax (VAT) by states notwithstanding, the Centre will go ahead and introduce the Constitutional amendment on service tax in Parliament on Tuesday.
The Constitutional amendment was originally mooted to compensate states for a possible revenue shortfall while implementing VAT.
This amendment — which has been approved by the Union Cabinet — along with the consequent legislation will give the Centre the power to levy the tax and both the states and the Centre powers to collect and appropriate the proceeds. Both laws, when passed by Parliament, will shore up revenues of states which implement VAT.
Meanwhile, undeterred by the Centre''s decision to distance itself from the VAT regime, the empowered committee of state ministers met here today to review the preparedness of states to switch over from the existing sales tax regime to VAT.
The committee, which is scheduled to meet finance minister Jaswant Singh on Wednesday, is expected to re-iterate the states'' commitment to go ahead with VAT in the near term.
In his reply to the debate on the Finance Bill ’03 in Lok Sabha, Mr Singh said that legislation of states should be amended to conform to the decisions taken by the empowered committee and also to the agreed upon rates latest by May 5, failing which it will not be possible to introduce VAT by June 1.
The fresh deadline, however, remains elusive.
Mr Singh also made it clear that the proposed reduction in the rate of central sales tax (CST) from 4% to 2% is contingent on the introduction of VAT by all major states from all regions of India. A patchwork VAT, according to him, was simply not workable.