Headway on dual control, GST likely in July: FM Arun Jaitley https://indianexpress.com/article/business/economy/headway-on-dual-control-gst-likely-in-july-arun-jaitley-4477739/

Headway on dual control, GST likely in July: FM Arun Jaitley 

Finance Minister Arun Jaitley said 90 per cent of tax assessees below the annual turnover threshold of Rs 1.5 crore will be under the control of states and the remaining 10 per cent will be under the Centre’s jurisdiction.

 Finance Minister Arun Jaitley addresses a delegation while speaking on the GST issues during the Vibrant Gujarat investor summit in Gandhinagar on Wednesday. (Source; Reuters)
Finance Minister Arun Jaitley addresses a delegation while speaking on the GST issues during the Vibrant Gujarat investor summit in Gandhinagar on Wednesday. (Source; Reuters)

The Centre and the states managed to hammer out a broad consensus over the contentious issue of division of administrative control over tax assessees at the ninth meeting of GST Council Monday though it will be at the cost of a three-month delay in the rollout of the proposed indirect tax regime. Finance Minister Arun Jaitley said 90 per cent of tax assessees below the annual turnover threshold of Rs 1.5 crore will be under the control of states and the remaining 10 per cent will be under the Centre’s jurisdiction. For a turnover of Rs 1.5 crore and higher, there will be equal division of assessees between the states and the Centre.

Calling it a significant headway, Jaitley said, “The states would do 50 per cent of assessees above Rs 1.5 crore turnover and 90 per cent of less than Rs 1.5 crore turnover. The Centre would get to assess 50 per cent of above Rs 1.5 crore turnover and 10 per cent of less than Rs 1.5 crore turnover.”

Some ministers, including West Bengal Finance Minister Amit Mitra, are learnt to have objected to the 90:10 ratio of division between the states and the Centre, instead seeking exclusive control over all tax assessees below the annual turnover threshold of Rs 1.5 crore.

“As far as the dual control is concerned, the Centre has come, finally, very close to the position that the empowered committee had taken, where under Rs 1.5 crore, all goods, all deemed goods, and the decision taken on which I had to put a dissent, that 90 per cent of all goods and services will be with the states. Only 10 per cent of services are with the Centre, on which I had to dissent because I wanted 100 per cent. So we have come very close to 100 per cent but unless it is 100 per cent, I was constrained to dissent, because I wanted that extra 10 per cent,” Mitra told reporters after the meeting.

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Kerala Finance Minister Thomas Isaac, who left the Council meeting early, said that there was no decision and an agreement was being worked upon. “The discussions are still going on. There is no agreement as to how the taxes will be administered… territorial waters, taxation powers will be delegated to the states… some compromise will be worked out. Below Rs 1.5 crore could be under the administrative control of states. Centre would have certain limited amount of audit functions that could be one possible compromise. Discussions are going on,” he told reporters.

On the dissent by Mitra, Jaitley said it was confined to the extent of the 90:10 division between states and the Centre, and on other issues, he was in agreement with all other GST Council members. The changes would be incorporated in the draft legislations relating to Integrated GST (IGST), state GST (SGST) and Central GST (CGST), following which they would be shared with the Council at its next meeting on February 18.

Citing that the whole process will take time till March, Jaitley said that July 1 will be a “more realistic date” to roll out GST. “…once they are free from making the drafts, the officials who are lending technical support will start working out the fitment of rates in various slabs. This exercise will, in all probability, take us into the month of March. The ministers and Council then assessed the realistic date by when the three important things pending — final draft legislation and rules, secondly, approval of these by the legislative bodies and fitment of rates can take place. I requested the ministers to give their opinion about the realistic dates and there was a broad view that July 1 appears to be more realistic,” Jaitley said.

He said since it is a transactional tax, it can be introduced any time. The Council members felt that industry and trade should be given some adequate notice and once the rates are decided, the systems of GSTN will have to be modified suitably, he said.

The government is constitutionally mandated as per the Constitution (One Hundred and First Amendment) Act, 2016, passed by Parliament last year, to roll out the indirect tax regime by September 16 this year. On the issue of taxation powers in offshore areas, which was raised by states in the previous GST Council meeting, Jaitley said states will have taxation powers up to 12 nautical miles in offshore areas.

Since the GST will miss the April 1 deadline, the indirect tax receipts estimates in the upcoming Budget for 2017-18 will include a combination of excise and service tax for three months and GST for the next nine months, a senior government official said.

Also, the penal arrest provisions, which were part of the draft law, have been diluted. Officials said default in payment of taxes amounting up to Rs 2 crore will be a bailable offence. The arrest powers will be invoked only in cases of criminal offences like forgery and tax not deposited in government coffers.

Tax experts said that the consensus on cross empowerment and a delayed rollout date has ended uncertainty and will give enough preparation time to the industry. “Resolution of contentious issues such as dual control in today’s meeting signifies the most decisive step that we have seen on the GST front in the past three months. The announcement that GST rollout would be from July 1 instead of April 1 is welcome as it ends the anxiety of the industry to have a firm rollout date in place,” M S Mani, Senior Director, Indirect Tax, Deloitte Haskins & Sells LLP said.

Harishanker Subramaniam, National Leader — Indirect Tax, EY India, said, “It’s indeed a very positive development and takes the GST journey forward. What remains now are the rates for various goods and services which I am sure will be decided in March 2017.”