The Maharashtra chief minister Vilasrao Deshmukh wants the Centre to scrap the sales tax and instead introduce an integrated national tax on goods and services.
After replacing the states sales tax by VAT, it is time that we move towards goods and service tax,, Mr Deshmukh said at the recently held National Development Council meet chaired by Prime minister Manmohan Singh. Mr Deshmukh suggested that the Centre and the state government should tax all services and inter-state services in the same manner as inter-state sales, that is, taxation on destination principle.
It is necessary to move to the modern system for which the government should begin a process and reform the present central sales tax system wherein the exporting state taxes the consumption in the importing states, he suggested.
Mr Deshmukh thinks that this needs to be replaced by a system, where the tax on inter-state sales is paid in advance to the importing state and the importer is authorised to claim input tax credit of the tax paid on his inter-state purchase.
The proposal is fully compatible with the basic principles of VAT and also protects the exporting states from potential wrongful claims of input tax credit by any exporter in that state, he added. He also expressed the need to convert the state VAT into a standard VAT on goods and services.
In Maharahtra the services are growing at 12% whereas agriculture is stuck at a paltry 3% growth, Mr Deshmukh said. And hence effective implementation of service tax yields more for the state.