No tax on education and health services meant for common man

States will not impose tax on education and health services, especially those catering to the general populace, as a panel of state finance ministers on Thursday reached a consensus on the issue.

"Areas relating to health and education may not be included in the service tax. That is the view, we have taken," Asim Dasgupta, chairman of the Empowered Group of state finance ministers on Value-Added Tax, told reporters here.

When asked whether tax on these services is completely ruled out, Dasgupta said, "Yes, particularly those catering to the common man."

Asked to clarify if it meant services rendered by public sector and state-run institutes only, he said certain private entities also provide these services to the common man.

Besides health and education, the Centre has offered 42 services - such as legal, sports and performances of Bollywood actors - to states for collecting service tax as part of package for compensating them for revenue loss due to phasing out of a levy imposed on inter-state sale of goods, called Central Sales Tax.

However, states could not evolve a consensus on which services to tax as certain services like education could evoke a public outcry and most others are local in nature.

CST is reduced from four per cent to three per cent this fiscal and would be eliminated by April one, 2010, when Goods and Service Tax is proposed to be introduced.

The purpose of VAT and then GST is to create a common Indian market, for which the tax on inter-state sale of goods needs to be done away with.

Source : Economic Times - Gurgaon, Haryana, India, dated 20/12/2007