States seek more say in service tax

In what could impact government plans to implement the GST from April 1 next year, fresh issues have crept up, which need to be resolved by the Centre and states.

After some states red-flagged Centre’s exclusive control over existing service-tax dealers with an annual turnover of up to Rs 1.5 crore, they now want clarity over its role in cases where luxury tax, entertainment tax and certain VAT on items like software and works contract will be merged with service tax.

As states control hotels, movie theatres and restaurants levying taxes on them, which would now merged with service tax in the new indirect tax regime, they don’t want to easily cede control over them. As per an earlier understanding between the Centre and states in the GST Council meeting, it was in-principal decided that states will assess small businesses with annual earning limit of Rs 1.5 crore for goods while service tax matters will be dealt by the Centre.

All the new service tax assesses were to come under dual control formula, which mandated a joint assessment by the Centre and the state.

“That was the initial understanding, but one or two members felt that beyond Rs 1.5 crore, service tax should be dealt with dual control basis even for the existing dealers,” Haryana finance minister Captain Abhimanyu told FC, talking about deliberations in the second GST Council meeting,