GST: Centre, States reach consensus over dual control, roll out likely from July 1


New Delhi: India will likely be able to roll out the goods and services tax (GST) from July 1 following a breakthrough on Monday over the seemingly intractable issue of tax administration after the Centre accommodated states’ concerns. “It’s a significant headway,” Union Finance Minister Arun Jaitley said after a day-long meeting of the GST Council with […]


GSTNew Delhi: India will likely be able to roll out the goods and services tax (GST) from July 1 following a breakthrough on Monday over the seemingly intractable issue of tax administration after the Centre accommodated states’ concerns.

“It’s a significant headway,” Union Finance Minister Arun Jaitley said after a day-long meeting of the GST Council with both sides agreeing on most matters. Under the proposed tax regime, 90% of all assessees with a turnover of Rs 1.5 crore or less will be assessed for scrutiny and audit by state authorities, the remaining 10% by the Centre. Above that limit, Centre and states will assess in a 50:50 ratio. The agreement hammered out was based on a proposal by Tamil Nadu.

“Each assessee would be assessed only by one authority,” Jaitley said, putting to rest fears over dual administration by both state and the Centre.

“You won’t have to jump from authority to authority, that’s the advantage of GST… Computer programming will be done in such a way that there is no discretion (in selection of assessees).” 

This division of tax administration had been holding up the finalisation GST tax laws, making it difficult for the government to stick with the April 1 deadline.

The GST Council, which has Jaitley as Chairman and state ministers as members, resolved to share the entire taxation base between the assessment machinery of the Centre and the states.

Both will have intelligence based assessment powers, Jaitley said. The Centre has also given leeway to states on integrated GST (I-GST), which deals with inter-state sales.

Jaitley said the power to levy and collect the I-GST lies with the central government but states will also be cross-empowered in the same ratio as above through a special provision in law. Any IGST disputes among states will be resolved by the Centre.

Regarded as one of India’s most sweeping reforms since Independence, GST will help turn the country into a common market by removing state tariffs that act as a barrier to free movement of goods and services. The accord will come as a relief to the Centre after concerns that the November 8 demonetisation may cause states to put up their price. To be sure, the constitutionally mandated timetable requires GST has to be in place by September at the latest.

Jaitley said all ministers present at Monday’s meeting agreed to the proposals except West Bengal finance minister Amit Mitra. The state wanted exclusive jurisdiction for states up to the limit of Rs 1.5 crore. Other states did not support West Bengal’s demand, said an official present at the meeting. On the other hand, states such as Assam and Maharashtra demanded a higher number of assessees above the Rs 1.5 crore threshold and fewer below.

The Centre also ceded ground on taxation rights over the sea. Territorial waters extending to 12 nautical miles fall under control of the union government but as per convention, states will be empowered to collect tax on any economic activity in this zone. “This decision has been taken after very wide consultations,” Jaitley said.

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

NEW TIMELINE

The council decided on a new timeline for GST’s rollout factoring in three key pending matters — final draft legislation and rules, approval of these by legislative bodies and setting of rates for the slabs agreed. “There was a broad view that first of July appears to be more realistic,” Jaitley said, adding that GST is a transactional tax and can be introduced any time.

He said ministers also felt that industry and trade will have to be given adequate notice and once the rates are decided, the GST Network’s system will have to be modified suitably. The GSTN is GST’s technological backbone.

Tax experts said the latest developments will help industry prepare for the new regime.

“With indication of revised implementation date of July 1, 2017, for GST, industry gets muchneeded clarity and some additional time for preparation for this huge reform,” said Pratik Jain, leader, indirect taxes, PwC India.

Rajeev Dimri, leader, indirect tax, BMR & Associates LLP, said, “Administrative control with a single authority (either Centre or state) would ensure ease of compliances and assessment for assessees.” 

Source: Economic Times

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