States may get to collect service tax from more areas

The centre is considering giving the states the right to collect service tax on selected services of intra-state nature. Minister of State for Finance, SS Palanimanickam told Parliament on Tuesday, the discussions are in the context of working out a package for compensating the states for the revenue loss, they would face as a result of the proposed phasing out of the Central Sales Tax (CST), reports Economic Times. 

But while states will have the power to collect and appropriate the service tax proceeds from certain Services, they will not enjoy the transfer of the right to levy the tax. The right to levy service tax continues to remain with the Central Government as per the Constitutional provisions, he said. The Empowered Committee of State Finance Ministers has proposed transfer of 124 services to the states, including 67 services presently being taxed by the central government, as they are considered to be of intra-state nature by the EC.