The Cabinet approved on Thuirsday a Constitution amendment Bill to clarify the grey areas in levying service tax.
While it cleared the inclusion of services in the Union list for levy of taxes, it also approved the insertion of a new clause under which states and the Centre would demarcate the services to be taxed by them separately.
The Cabinet also approved setting up a special purpose vehicle to execute the Rs 8,000 crore (Rs 80 billion) golden quadrilateral project of the Railways to augment the rail link between the four metropolises.
After Parliament's approval, the constitutional amendment will have to be ratified by the states, before the value-added tax can be introduced by April 1, 2003.
At present, service tax is not part of the Union, State or Concurrent Lists, and is levied by the Centre using its "residual powers".
The Bill will amend the Union List under the seventh Schedule of the Constitution to effect a new entry, 92C, and to insert a new article, 268A, to enable the Centre to frame a law to determine how the proceeds of the tax would be shared with the states. There will also have to be a consequential amendment in Article 270 to expand its scope.
Information and Broadcasting Minister Sushma Swaraj said after the meeting the constitutional amendment Bill was expected to be introduced in Parliament in the next session.
"At present, service tax is not specifically mentioned in either of the lists. The proposed amendment will make a specific mention of the tax in the Union List and enable states to collect and appropriate the proceeds. It will also pave the way for the inclusion of services within the purview of the VAT regime," Swaraj said.
Giving details about the Railways' golden quadrilateral project, she said the proposal involved modernisation and augmentation of the high-density rail network connecting Delhi, Mumbai, Kolkata and Chennai and accounting for 65 per cent of freight and 55 per cent passenger traffic of the Railways.
In a decision described by Swaraj as "radio revolution", the Cabinet today allowed educational institutions like universities, engineering colleges and even residential schools to set up their own low-power radio stations of up to 0.5 kw.
The government would not levy any licence fee and institutions would only be required to pay spectrum fees to the wireless planning co-ordinator, she said.
The Cabinet also approved an amendment to the Delhi and Punjab High Court Act to increase the pecuniary jurisdiction of the Delhi High Court from Rs 500,000 to Rs 2,000,000, the minister said.
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