Concerned over the public response to service tax on education, state governments may decide to defer their plan to the next fiscal. States are also finding difficult to tax other services, including legal service and healthcare, as a result of this.
In this backdrop, the next meeting of the empowered committee on Friday would prove to be crucial, state government officials said. The empowered committee of state finance ministers had decided in its last meeting that only high-end items, including higher education, especially technical and vocational education by private schools and colleges, would be brought under the service tax net. However, preparing a final list of services to be taxed is proving to be extremely difficult for states. Around 10 services are expected to be brought in the tax net, but states are finding it difficult to reach a consensus on the issue, sources said.
The states had been given the right to tax 44 new services including health, education, parking and entertainment as a compensation for phasing out the central sales tax (CST),
The finance ministry officials said the decision to begin taxing any of the 44 new services would depend on the recommendations of the empowered committee.
Deferring the decision is however, unlikely to hit state finances much, a government official said. The 33 services that have been transferred to states are expected to generate a good amount of revenue.