Karnataka seeks nod to hike service tax

Karnataka has decided to seek the Centre's approval to hike service tax and professional tax and demanded that the Central sales tax should not be abolished, minister for finance and industries P G R Sindhia said on Monday.

Finance ministers of states which have moved into the VAT system of taxation would meet the Union finance minister P Chidambaram on December 16 in New Delhi and press for implementation of these demands, he told reporters here.

Karnataka would urge the Centre to drop its move to abolish central sales tax (CST) in the next two years, since states like Karnataka and Maharashtra which account for a majority of manufacturing sector would lose heavily on tax revenues.

Karnataka was itself expected to lose at least Rs 2,000 crore tax revenues if four per cent CST was abolished. He, however, demanded that if the Centre abolished CST, the loss should be compensated.

Criticising the Centre's decision to recover Rs 158 crore granted to the state for flood relief operations, he said such a step would "sour" the Centre-state relation. The Centre sanctioned Rs 358 crore for flood relief, out of which it deducted Rs 158 crore without assigning any reason, he alleged.

A delegation led by chief minister N Dharam Singh would call on the prime minister Manmohan Singh on December 14 to release the deducted amount, he said.