The Lok Sabha today adopted the 95th Constitution Amendment Bill to provide tax on services as a specific entry in the Union List. The Bill will provide for insertion of a new Article 268A and a consequential amendment to Article 270 to enable Parliament to formulate modalities for the Centre to levy a tax on services and its collection by the Centre and states.
The amendment is instrumental in enabling the states to tax services in the post-value-added tax (VAT) dispensation. The Centre had earlier promised to allow states to tax "local services" as part of its compensation package.
At present, the power to levy a tax on services in general is not mentioned either in the Union List or the State List in the Seventh Schedule of the Constitution. However, by virtue of Entry 97 in the Union List, which gives power to the Centre to levy and collect any tax not mentioned in either the State List or the Concurrent List, the Centre has been levying an indirect tax of 8 per cent (earlier 5 per cent) on select services.
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Finance minister Jaswant Singh had earlier said in Parliament that states would be allowed to tax services only if major states from all regions of the country implemented VAT simultaneously.In the division, 333 voted for the Constitution (95th Amendment) Bill and 10 voted against it.
The AIADMK opposed the measure insisting the VAT-related legislation fell exclusively within the domain of states.
Replying to a brief discussion, Singh said the Bill, which would pave the way for inclusion of services within the purview of VAT, was not specifically mentioned in any entry in the Union List or the State List of the Seventh Schedule of the Constitution.
Participating in a brief discussion, members generally hailed the measure saying it would help in significant augmentation of revenues of the states in accordance with the proposed law and pave the way for eventual inclusion of services within the purview of state-level VAT.
Opposing the Bill, V Saroja of the AIADMK said her party was of the view that the measure came under the domain of the states and not the Centre. P K Bansal of the Congress, Rupchand Pal of the CPI-M, M V V S Murthy of the Telugu Desam Party, Anadi Sahu and Kirit Somaiya (both of the Bharatiya Janata Party) wanted the government to ensure avoidance of double taxation while collecting the levy and should leave out menial services from its purview to help the common man.