Active Stocks
Tue Mar 19 2024 10:21:08
  1. Tata Consultancy Services share price
  2. 4,021.35 -2.98%
  1. Tata Steel share price
  2. 148.85 -0.50%
  1. NTPC share price
  2. 312.80 -1.37%
  1. HDFC Bank share price
  2. 1,441.40 -0.33%
  1. Power Grid Corporation Of India share price
  2. 263.10 -0.72%
Business News/ Politics / Policy/  Consensus continues to elude GST
BackBack

Consensus continues to elude GST

States are unwilling to accept the model of dual control of small traders proposed by the Union government

Photo: Hindustan TimesPremium
Photo: Hindustan Times

New Delhi: India’s move to create a unified market with a simple and common tax structure hit a new hurdle with states unwilling to accept the model of dual control of small traders proposed by the Union government.

Together with existing differences on the design of the goods and services tax (GST), this has dimmed the prospect of the constitutional amendments required for the new tax structure to be carried out this financial year as previously signalled by finance minister Arun Jaitley.

In a meeting of state finance ministers held in New Delhi on Wednesday, states said they want traders with an annual revenue of more than Rs1.5 crore to come under the supervision of both the Union and state governments and those with revenue below Rs1.5 crore to come under the supervision of only the state government. The central government has, however, informed states that they will get only administrative rights to control traders and no legal rights when it comes to the central GST, or CGST, component.

“This is not acceptable to the states. Unless the problem of dual control is resolved, it will be very difficult to implement GST," said Abdul Rahim Rather, chairman of the empowered committee of state finance ministers and the finance minister of Jammu and Kashmir.

“States decided that (for traders with revenue) up to Rs1.5 crore, government of India will not interfere in assessments, audits and other matters. But the government of India officers insisted that only administrative control can be given to states (over traders with revenue) up to Rs1.5 crore in respect of CGST. States insisted that legal powers should also be given to states (for these traders) so far as CGST is concerned," he said.

States want legal rights that will enable them to issue notices to traders.

On the issue of a threshold level—a level of turnover below which an entity will not be subject to GST—states have agreed that the level should be Rs10 lakh for so-called normal category states and Rs5 lakh for special category states. Though a committee comprising central and state government officials had recommended a threshold limit of Rs25 lakh for normal category states, state government officials said the Centre and the states may finally settle for a threshold of Rs15 lakh.

A higher threshold will save compliance costs as small traders contribute only an insignificant amount of revenue but are harder to regulate.

The meeting was also not able to arrive at a final decision on the exemption list, though there was an agreement that the exemption list of the centre and the states should be uniform as far as possible.

Currently, while the states exempt 96 goods, the central value-added tax does 243 items.

Gujarat finance minister Saurabh Patel said the existing revenue of states should be protected. Referring to Jaitley’s statement earlier this month that the interests of states would be protected, Patel said GST can be implemented if concerns of the states are protected.

Gujarat, Madhya Pradesh (both ruled by the Bharatiya Janata Party that is also the leading constituent of the National Democratic Alliance government in New Delhi) and Tamil Nadu have been opposing the provisions of GST for fear of loss of autonomy. There are hopes that the opposition from some of these states will be overcome, especially because the same government rules over the country as well as the first two states.

J&K minister Rather said the central government has not responded to states’ demand to keep out petroleum from GST. States want petroleum and liquor to be kept out of GST in the constitution amendment Bill. They also do not want entry tax that is levied and collected by a local body to be subsumed under GST.

Prashant Deshpande, leader, indirect tax, at Deloitte Touche Tohmatsu India Pvt. Ltd, said states may not agree to a very high threshold level given the fear of loss of revenue.

“At present, the threshold for VAT is Rs5 lakh for most states. Because of this, states will not agree to a drastic increase in the threshold as many traders will go out of the net," he said.

“But an attempt at consensus is possible and the Bill could be passed in the winter session of parliament."

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Politics News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
More Less
Published: 20 Aug 2014, 11:39 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App