List of services attracting levy of service tax is wide and most of them are already under the state tax domain.

State finance minister through another spanner to Union governments tax reform exercise, particularly GST (goods and service tax) will challenge its service tax concept as, It is not only violation of the constitutional provisions but, also an encroachment in state tax domain. Bhopal will host the show on 9 and 10 January.

The long-delayed goods and service tax (GST) has already left state-central relations sour. The fresh bid to take on Union government on service tax issues is likely to add more bitterness to it.
According to a state government official, The list of services attracting the levy of service tax is wide and covers 125 services and most of them are already under state tax domain.

According to a draft on Taxation of services based on negative list of services under residuary powers for the proposed two-day meeting, the states are likely to refer to a Supreme Court order in civil appeal (No 6319 of 2011) in which the Apex court has prescribed domain position of transaction test for deciding whether any activity is a sale of goods or supply of services.

The draft prepared for the discussion reads, All activities in which the dominant element is an event or activity taxable by the states should be considered to be outside the scope of residuary power as Constitution (eighty-eighth) amendment Act 2004 has yet not come into force that provides Union list providing for levy of service tax by the Union.

Central government has encroached a number of activities by putting them under service tax net which actually comes under state tax domain. For example, hotel or restaurant is a part of service industry but, once the activity of a restaurant is supply of food and drink is included in entry 54 list-II that provides for taxation of events with relation to goods by the states, it cannot be taxed under residuary power even if it is supplied in an air-conditioned restaurant having license to service alcoholic beverages, a governement official told Business Standard.

The empowered committee had considered a revised concept paper in its last meeting on 28 November 2011 and decided that states officials for taxation should examine it. Some transactions are being considered services by the Central government, in fact, these are considered goods or luxury or entertainment by some state governments, too. As a result taxation of such activities may not provide any additional tax-base to states as proposed in GST, it is mere encroachment into taxation fields assigned to states by the Constitution, he further added. The states are likely to raise objections under certain activities which are under state tax domain but, subject to levy of service tax by the Union government.

These are transport of goods by road, through inland waterways, steamer agents, rent-a-cab operator. Secondly, personal services like beauty parlours, health and fitness centers, dry-cleaning, outdoor caterers, pandal and shamiyana services, membership of clubs and associations, services of providing accommodation in hotels, inns, clubs, guesthouses; etc. Thirdly, land buildings, construction services related to commercial or industrial buildings, residential complexes, services provided by builders in relation to preferential location, internal development, work contract service.

Fouthly, advertisement, promotion, marketing or organising of games of chance (including lottery, etc), sale of space for advertisement, cable operators, advertisement agencies, broadcasting of entertainment agencies and broadcasting of programmes.

Lastly, sale of goods, services of air-conditioned restaurant having license to service alcoholic beverages in relation to service of food or beverages, lease of goods, right to use immovable property, construction of complexes, building, civil structure or a part thereof including a complex or building intended for sale of buyer, wholly or partly, etc.