You may have to pay tax on services like pre-school, university and higher education, hospitals, services of political organisations, news agencies, libraries and even legal services; if the Centre accepts the compensation package finalised by the states on Friday for phasing out the central sales tax of 4 per cent by 2009-10.

These services are among a list of 124 identified by the states. Being intra-state in nature, they do not come under the states' tax net.

These could be transferred to the states to compensate for revenue loss arising from the phasing out of the CST.

The phase out is proposed to begin from October 1. It will depend on the Centre agreeing to the compensation package.

The states will review the position after CST is brought down to 2 per cent.

The package was vetted by the empowered committee of state finance ministers on value added tax which met to discuss the report of the technical committee of state sales tax commissioners on the issue. The report would now be fowarded to Finance Minister P Chidambaram.

In addition to the 124 services, states have identified 68 intra-state services which are presently taxed by the Centre to be transferred to them.

These include advertising agencies, air travel agents, beauty treatment, couriers, internet cafes, health and fitness, opinion poll, private security and rail travel agents.

Transfer of these services to the states would be coupled with an increase in the percentage of devolution of service tax proceeds from 30.5 per cent to 50 per cent.

The states have suggested imposition of VAT on imports, making items like textiles, sugar and tobacco taxable through the additional excise duty under VAT from April 1, 2007 and disbanding of the declared goods list.

They, however, have agreed that 32 services taxed by the Centre should be retained by it. These include banking and financial services, broadcasting, credit rating, insurance, ATM, telephone, air transport, railways and stock broker services.

Sources said states like Delhi, Gujarat and Maharashtra which accounted for a significant share of the CST collection would be willing to phase out the tax in two, instead of three phases, if the Centre agreed to their compensation formula.

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