Monday, December 12 2005 17:32 Hrs (IST) - World Time -

Bangalore: Karnataka has decided to seek the Centre nod to hike Service tax and Professional Tax and demand that the Central Sales Tax should not be abolished, Minister for Finance and Industries P G R Sindhya said today (Dec 12, 2005).

Finance ministers of states, which have moved into the VAT system of taxation, would be calling on the Union Finance Minister P Chidambaram on December 16 at New Delhi to press for these demands, he told the press here.

The state would urge the Centre to drop its move to abolish CST in the next two years, as states like Karnataka and Maharashtra which account for majority of manufacturing sector would loose heavily on tax revenues.

Karnataka itself was expected to loose atleast Rs 2,000 crore tax revenues in the event of four per cent CST was abolished, Sindhya said.

He however demanded if the Centre abolished CST, the loss should be compensated to the state.

Assailing the decision of the Centre to recover Rs 158 crore funds granted to the state for flood relief operations, Sindhya said such a step would sour the Centre-States relation.

The Centre sanctioned Rs 358 crore for flood relief, but deducted Rs 158 crore out of that 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.