The Hindu Business Line : Kerala demands say in service tax collection

This was made clear here to newspersons by the Finance Minister, Mr K. Sankaranarayanan, on his return from New Delhi where he had attended a meeting of the Empowered Committee of Finance Ministers of States and Union Territories on Value-Added Tax (VAT).

According to the Minister, he had raised the issue of service tax collection at the meeting. The Union Government had, in turn, promised to hold separate discussions on it.

The Union Government, he said, should look at adopting an approach that would help solve the debt crisis being faced by different States.

A considered view needed to be taken with respect to the demands for debt write-off, debt swapping and market borrowing. He hoped the forthcoming Union Budget would address these issues.

According to Mr Sankaranarayanan, Kerala would implement VAT only if other southern States went ahead with its implementation. The State wanted rubber, pepper, cardamom, cashew and tea to be taxed only at the last point of purchase.

Collection of tax at all points would lead to serious social and administrative problems in the State. On their part, the States should seek to ensure uniformity in tax rates.

According to the Minister, petroleum products and liquor would be exempted from the purview of VAT. Tax on tea would be brought down to 4 per cent. The State also wanted goods such as husk, plantain leaves and mats made of pandanus leaves to be exempted from tax while that on rice needed to be reduced to 1 per cent from 4 per cent.

The State had demanded that it be adequately compensated if revenues were to be hit following implementation of VAT. This should be to the extent of 100 per cent in the first year, and 2002-03 or 2003-04 should be taken as the base year for calculations thereof.

However, it was worth noticing that Haryana, which had effected the switch over to the VAT regime, had registered a growth in revenue to the tune of 24 per cent.

The Centre had returned a Bill on VAT passed by the Kerala Assembly, quoting some general objections. Adequate changes would be made to the draft without being seen as harming the interests of the State.

Replying to a specific question, the Minister said the State Government was confident of clinching the second tranche of loan from the Asian Development Bank.