States give in-principle nod to GST

State governments have in-principle approved the proposed shift to a goods and service tax (GST) on all services, raising hopes that the major tax reform could be introduced in the coming budget session.

All services, except for a few defined under a negative list, will be taxed from the next fiscal. It also adds new services to the list of taxable services, expanding the tax base for the centre.

States have, however, specified a list of services, such as luxury and entertainment that would remain taxed at the state level. Once the union government agrees to the proposal, it is likely to be included in the 2012-13 budget.

"We have in principle agreed to tax services based on a negative list," reports quoted Sushil Modi, deputy chief minister and chairman of the empowered committee of state finance ministers, as saying.

The GST has missed several deadlines for implementation due to resistance from states, mainly ruled by opposition  parties, which fear a loss of fiscal autonomy.

The states' approval comes over two years after the committee first raised its objections to the tax.

The GST bill, which was introduced in parliament last March, needs the approval of two-thirds of parliament and at least half of the country's 28 states to become law.