GST council meeting: Law Ministry says only Centre can control traders

Proposal likely to be presented in the GST Council meeting scheduled on December 11 and 12

Written by George Mathew | Mumbai | Published:December 11, 2016 10:30 am
Law ministry, GST, goods and services tax, GST Traders, GST council meeting, integrated GST, india news, business news, economy india, economy news Photo for representational purpose.

The Law ministry has said only the central government can control traders under the Integrated Goods and Services Tax (IGST) law and State Governments should not be empowered to levy and collect IGST on inter-state sales and purchases. The opinion is bound to upset many states on the eve of another round of meetings of the GST Council. The law ministry’s opinion in favour of the central government will be a setback to states such as Tamil Nadu and West Bengal, and could be a stumbling block to GST. The proposal will be presented in the GST Council meeting scheduled on December 11 and 12.

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The ministry’s opinion has come at a time when all the states want power to control traders engaged in inter-state sales and purchases. The draft integrated GST law says only the central government will have administrative power over all traders engaged in inter-state sales. The meeting of the GST Council, headed by finance minister Arun Jaitley, held last week failed to reach a consensus on the contentious issue of control.

The law ministry, in its opinion, which was accessed by The Indian Express, said: “It’s understood that the issue under examination is in respect of authorisation of state governments tax authorities to levy and collect IGST and not the distribution thereof. In this context, Clause (1) of Article 269A is very much clear in terms i.e. ‘goods and services tax on supplies in the course of inter-state trade or commerce shall be levied and collected by the Government of India’ and therefore, there appears no scope for assignment of powers to the state governments’ tax authorities in relation to levy and collection of IGST as it is the normal rule of construction that when a statute vests certain power in an authority to be exercised in a particular manner then the said authority has to exercise it only in the manner provided in the statute itself.”

It is understood that states are unlikely to accept the law ministry’s opinion and will insist on control of traders by state authorities. While the finance ministry is set to go by the opinion of the law ministry, it’s to be seen whether some concessions will be granted so that GST can be rolled out.

The bone of contention is how the small taxpayers — who, under the existing regime, are largely with the states — will be administered. The states want exclusive control on businesses with turnover below Rs 1.5 crore (the current threshold for central excise), including the service taxpayers, who are close to 30 lakh in number. The Centre is inclined to give the states exclusive right to assess goods suppliers up to Rs 1.5 crore, but is firm that the service tax assessees should remain under its sole control at least in the initial years. The states don’t have the competence to deal with service tax, which the Centre has acquired over the last 22 years, officials said.

The central government plans to implement GST from April 1, 2017. The GST has to be rolled out by September 16, 2017, as the existing indirect taxes will come to an end and it would not be possible for either the centre or states to collect the taxes. The GST Council will have to finalise the model GST, Integrated GST (IGST) and compensation laws at the earliest to implement the new tax regime from the desired date.

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  1. S
    Jun 20, 2017 at 2:44 pm
    A Man Power supplier hire 50 labourers and supply their services to a government department. Neither service provider is registered nor service receiver is registered. Hired labour will not issue any tax invoice or service receiver does not want any input credit. How middle man service provider will enter purchase value in GST return. Who will be liable to pay GST either service receiver or service provider. Among 3 parties service receiver is a govt. deptt. not registered. Service provider is registered. Workers who are providing services to govt. deptt. through a service provider not registered. The middle agent will have no any purchase bill. Under the cir stance who will be liable to pay the GST.
  2. S
    Jun 20, 2017 at 2:38 pm
    Services completed on 30-06-17, Tax Invoice will be raised on 1st July onward which rates of tax will be charged either 15 percent or 18 percent.
  3. S
    Jun 20, 2017 at 2:35 pm
    The Service Tax Payer's would not like the control of two governments. Dual control create exploitation of Tax Payer's. In Tax Invoice a Man Power Supplier how will show the GST either CGST 18 percent or CGST 9 percent and SGST 9 percent supplying Man Power Services within One State. In the absence of Gazette Notification for services has not been issued yet. How the service receiver will pay 18 percent GST on 1st July if any bill raised on this date in the absence of Gazette Notification of Rates.
  4. S
    Dec 11, 2016 at 12:00 pm
    The arguement of centre that states dont have experience about service tax is flawed. By this logic centre does not have experience of VAT and other taxes which were till date were administered by states. And when w GSt regime is new everyone will need training including centre and states machinery.Looks like centre is not ready to take states in to confidence on many issues and its pushing it on the path drafted by Central tax authorities.
  5. N
    Dec 11, 2016 at 10:49 am
    Perhaps, the Centre can give in by granting the service tax component of GST below 1.5 cr to the States , and the States reciprocate by not insisting upon control of IGST .lt;br/gt;lt;br/gt;But all this needs people in the Union Cabinet who are not abrasive, do not make snide remarks about the Opposition and talk diplomatically. There is hardly any one in the Union Cabinet except Ms Swaraj who fills this bill . The tragedy is that she will be out of action for a long time now.
  6. A
    Anand Ch
    Dec 12, 2016 at 11:05 am
    On the face of it, no State will agree. Money from trade is the life line for many parties and officials. No way.
  7. S
    Dec 12, 2016 at 10:37 am
    A strong centre is the need of Indian political and economic system. Central Govt should not give its sole authority to collect CGST and IGST across the spectrum without any lower limit of 1.5 Cr etc. lt;br/gt;The developmental challenges of the country demands more and more revenue and giving sole control to States up to 1.5 cr will lead to revenue leakages as and that will impact Revenue collection of Central Govt also. We all know the functioning of most of the State Govts. and it's officials. There is hardly any vigilance and citizen charter is being followed whereas in Central Govt CVC, CBI, with Departmental Vigilance is functional and Citizen charter is followed. It would have been better if a unified tax structure could be made but even in federal polity Let's not compromise with efficiency and services and successful GST.
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