The package will increase the revenue share of states in tax on 33 services from 30.5 per cent currently to 100 per cent. It will also authorise them to impose tax on 44 new services such as fitness, health services, legal services and education.

Additionally, the states will also receive budgetary support from the Centre.

There, however, was no agreement on taxing services like education for fear of public outcry .

As part of the reforms, the government will also introduce the Taxation Laws (Amendment) Bill, 2007 in the coming session of the Parliament.

Presently, tax is levied on 99 services, which include a diverse range of services such as telecommunication services, cable television and others.

A uniform goods and services tax had been flagged off in Budget 06-07 as the next big tax rationalisation measure in indirect tax after the statewide value added tax. It will ensure that all states and the Centre have a uniform rate of goods and service tax.

The Parthasarathi Shome Committee, which looked into the Kelkar Committee recommendations, had said VAT on services should be integrated with VAT on goods, both in design and administration.