New Delhi: Government on December 21 came out with the modalities of the Constitutional amendments to enable states to collect and appropriate service taxes, a Bill for which would be introduced in the Budget session of Parliament in 2003.

A note circulated in the National Development Council (NDC) meeting said a new entry (No 92C – Taxes on Services) be inserted in the Union List, Seventh Schedule of Constitution, to give Centre the power to levy service tax.

Government also intends to introduce a new Article (268A) in the Constitution to enable the Centre and states to collect and appropriate the proceeds of the tax in accordance with a new law to be enacted by Parliament.

The note also said Article 268A will be included among Articles that are excluded from the purview of operation of Article 270.

These amendments in the Constitution were approved by the Cabinet after taking note of the requests of states.

The proposed amendments in the Constitution would enable states and the Centre to appropriate the proceeds of the service tax without the revenue becoming part of the divisible pool under Article 270.

A working group under the Finance Ministry had already prepared the draft legislation, which would be referred to the Empowered Committee on Value Added Tax (VAT) for consideration.

The service tax would be part of the VAT legislations as government intends to introduce VAT on services.

Government plans to complete the process expeditiously and introduce a new legislation in the Budget session.

PTI