“Majority of states want a combination of vertical and horizontal (dual control structure). Below `1.5 crore turnover, states should tax, above `1.5 crore, it can be vertical division,” said Kerala Finance Minister, Thomas Issac. Reasoning the demand to be valid, Issac said that a vertical division of assesses for collection of taxes and for the purpose of audit would create problems for small taxpayers.
Under horizontal division, taxpayers would be divided both for administrative and audit purposes based on a cut off turnover. Centre proposed to do away the exclusive control of state governments over all dealers up to an annual revenue threshold of `1.5 crore. The issue was settled in the first meeting of GST council, however, a few states raised objection and demanded control of over 11 lakh service tax assesses.
A Senior Finance Ministry official explained that a horizontal division would be lopsided as 93 per cent of service tax assessees and 85 per cent of VAT taxpayers have a turnover below `1.5 crore. Hence the government had made the proposed change.
Source: The New Indian Express