Leave professional tax to states, says GST panel

The empowered committee of state finance ministers on goods and services tax (GST) has recommended that the proposed ceiling of Rs2,500 on professional tax be removed and that the states be allowed to decide the rate or quantum of the tax in future.

“The upper limit of the professional tax was fixed at Rs2,500 per annum in 1988, which is too low by today’s standards. We have recommended that the ceiling be removed and the state governments be empowered to decide on that,” Sushil Modi, chairman of the committee and deputy chief minister of Bihar, told DNA Money.

The committee has also reached consensus on a negative list on which there will be no central tax, said Modi. “The constitution allows state governments to levy taxes on certain services.

However, as of now the Centre is also imposing tax on such services leading to double taxation. Our recommendation is that all such entries should be in the negative list,” he said.

Professional tax is levied by state legislatures on professions, employment, trade and callings. West Bengal, Andhra Pradesh, Tamil Nadu, Karnataka, Maharashtra, Gujarat, and Madhya Pradesh are the ones that levy the tax.

The GST, targeted to be implemented by April 2012, aims to put in place a simplified tax regime, replacing the existing indirect taxes for goods and services. The move is expected to help streamline the supply chain of manufacturers and bring down their logistics spend.