After differences cropped up between Centre and states regarding the administrative control of service tax assessees in the second meeting of GST council on Friday, a technical committee of officers will now hold a series of meetings, beginning with one later this week in Ahmedabad to resolve contentious issues. The team will then brief their respective state finance ministers, who are scheduled to gather in the national capital for the third GST Council meeting from October 18-21.
In its first meeting on September 23, the GST Council, which is headed by finance minister Arun Jaitley, had decided to allow states to have administrative control over Value Added Tax (VAT) assessees with annual turnover of less than Rs 1.5 crore and for turnover of over Rs 1.5 crore, a system of cross empowerment between states and Centre was agreed by the Council.
For around 11 lakh service tax assessees, a status quo was decided in the first meeting. The finance minister had conveyed that state government officials will be trained in due course to handle the service tax cases, but till then Centre will have exclusive jurisdictional control. It was also decided that new assessees which would be added to the list would be divided between the Centre and states.
The decision was later opposed by some states in the second meeting last week. Some states in the meeting proposed to have a cross empowerment model for top service tax assessees and exclusive control for Centre for smaller assessees. The top service tax assesees constitute over 30,000 out of total 11 lakh service tax assessees at present. Also, states have asked for more clarity regarding control of service tax assessees in sectors such as construction where both goods and services are involved, a senior government official said. Though the Council could have conducted voting on the issue, it was decided to refrain from going ahead with a vote and instead build a consensus among the states, the official added.
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Due to this sticking point of service tax assessment between the Centre and the states, the minutes of meeting of the first GST Council meeting were not approved in the second meeting held on Friday.
“With regard to one item recorded in the minutes with regard to the service tax assessment in the new dispensation, there was a long discussion on the interpretation on the decision taken in the last meeting and that discussion consumed a lot of time today. That discussion was inconclusive and therefore it will continue in the next meeting on 18th (October),” finance minister Arun Jaitley told reporters after the second meeting on September 30.
The GST Council is trying to move swiftly to decide on issues of draft IGST, CGST and SGST laws and rules, GST rate structure and exemption lists by November 22 to meet its intended deadline of April 1, 2017 for the indirect tax regime. With two meetings, the Council has decided on threshold for
GST levy, area-based exemptions and draft rules dealing with registration, rules for payments, return, refund and invoices. The rules will be notified once the Act is passed and accordingly simultaneous changes are being made in model GST law. The GST Council has decided to fix the exemption limit for the indirect tax at Rs 10 lakh for northeastern states and hill states and Rs 20 lakh for other states along with decision to subsume all cesses into GST.
The next meeting of the council on October 18-20 will again take up discussions on service tax assessment and the formula for calculating compensation for states in case of revenue shortfall as a result of implementation of GST regime. The crucial issue of GST rate will also come up for discussion in the three-day meeting apart from selection of a state finance minister as the vice-chairman of the council.