No data on services sector delay GST implementation work  

Non-availability of data on the services sector is posing a stumbling block in finalising the Goods and Services Tax, which the Centre is keen to introduce from April 1, 2010.

“States do not have any data on services sector or experience with the levy. So that is one issue which has to be considered while finalising the GST structure,” said a senior finance ministry official.

The empowered group of state finance ministers will meet Finance Minister Pranab Mukherjee on October 8 this month to discuss the new indirect tax regime, which would do away with most of the indirect taxes and local levies.

The states have so far in their discussions not mentioned anything about the services sector as to how the services would be taxed, said the official, adding: “They do not remember there is anything like services sector.”

Earlier, when states were not agreeing to cut tax on inter-state movement of goods, called Centre Sales Tax, they were offered 44 services, mostly local, to tax. But they did not avail of the offer, as most services like those provided by barbers were local in nature and others like education could have sparked public wrath.

As such, states do not have any experience in taxing services and any data in this regard.

Only six months are left for the slated introduction of GST from April 1, 2010.

But with GST, they would be required to tax not only goods, but also services.

GST is expected to subsume most of the taxes levied by the Centre, like central excise and service tax, and those charged by the states such as VAT, purchase tax, octroi and others.

The services tax kitty has been growing quite well. Part of this amount is devolved to states.

At a time when other indirect tax components have declined severely, service tax fell only by 1.3 per cent in August.

The chairman of the Central Board of Excise and Customs had recently also said that among the three indirect tax components, services has grown the most in August.

Meanwhile, another stumbling block for the proposed GST from April 1 next year, would be some states not wanting to do away with local levies like purchase tax and octroi.

Purchase tax is levied by some states on agricutural produce when purchased from a state and taken to some other state, while octroi is levied on various articles brought into a district for consumption.

Moreover, states are worried about their fiscal autonomy as some of them are apprehensive that GST would take away their rights to tinker with the rates.

Source : Business Standard, India,  dated 05/10/2009