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Journalism of Courage
State finance ministers have agreed to a Rs 10 lakh threshold for imposing the goods and services tax (GST) but failed to reach a consensus with the Centre on the issue of dual control of the indirect tax regime. States have also suggested that the issues of exemptions and compensation structure for five years should be included in the Constitutional Amendment Bill for GST.
The deadlock could further delay the roll out of the tax although Abdul Rahim Rather, the chairman of the empowered committee of state finance ministers, expressed hope that the Constitutional Amendment Bill for GST would be introduced in the Winter Session of Parliament.
The EC, in its meeting on Wednesday, suggested that the Centre should hand over not only the administrative but also the legal powers to states to collect the Central GST from business with an annual turnover of up to Rs 1.5 crore.
But the proposal failed to pass muster with the Union finance ministry even though the meeting was expected to reach some consensus following Union finance minister Arun Jaitley’s commitment in the Budget to introduce the biggest indirect tax reform in the country since the value added tax was rolled out.
“There was no unanimity on the issue of dual control … the EC decided to recommend that for threshold of Rs 1.5 crore, the Centre will not interfere in assessment, audit and other matters. It will be left exclusively to states,” said Rather, who is also the finance minister of Jammu and Kashmir.
Sources said states were opposed to the plan as they wished to have greater control over manufacturing in their regions. Under the current plan of dual control, taxpayers with annual turnover of over Rs 1.5 crore would be taxed by the Centre, which will later disburse to states their share. Those with a turnover of less than Rs 1.5 crore would pay their taxes to states, which would subsequently pass on to the Centre its share.
However, states agreed on the other contentious issue of the threshold limit for the tax as well as pruning the list of exemptions. According to the plan, the threshold or the minimum limit over which the tax would be applicable would be on businesses with an annual turnover of Rs 10 lakh for general category states as against the earlier proposal of Rs 25 lakh.
