In the ninth meeting of the GST Council, the Centre and States, on Monday, reached a consensus on sharing powers for control over taxpayers under Goods and Services Tax (GST). The Government is now hopeful that the new indirect tax regime may be rolled out from July 1 as the previously planned April 1 launch is not possible. Besides, the next council meet has been slated for February 18 to approve of the drafts of Integrated-GST and associated legislations.
The consensus was reached after the Centre agreed to the demand of States to go in for horizontal split with regard to taxpayers based on annual turnover. According to the decision, States will have powers to assess and administer 90 per cent of the taxpayers under Rs1.5 crore annual turnover, while the remaining would be controlled by the Centre. For taxpayers with more than Rs1.5 crore turnover, States and the Centre will control and administer them in 50:50 ratio.
Briefing reporters, Union Finance Minister Arun Jaitley said that the differences between the Centre and the State Governments on the issue of dual control had been resolved, paving the way for the likely rollout of the indirect tax reform from July 1. “States would also have the powers to levy tax on economic activity within 12 nautical miles of territorial waters even though such rights constitutionally vest with the Centre,” Jaitley added.
The GST is the biggest indirect tax reform in the country and is expected to subsume several State-level levies into one thus creating a uniform tax regime, which will help the economy widen the tax base over a period of time. However, the Government expects that the GST will transform India into a single market, boost revenues through better compliance and simpler procedures.
Earlier in the day, it appeared that there was no consensus emerging on the issue of dual control after Kerala Finance Minister Thomas Isaac said the differences still persist. However, Jaitley confirmed, saying that the GST now looks realistically possible from July 1. “The Council will meet on February 18 to approve of the drafts of IGST law and other supporting legislation needs for subsuming Central and State levies like Excise Duty and Service Tax and VAT,” he said.
Jaitley further said that the power to levy and collect Integrated-GST - a tax on inter-State movement of goods and services - will lie with Centre but by special provisions in law, States will also be cross-empowered.
On the other hand, West Bengal Finance Minister Amit Mitra, said that he dissented at the council meeting as his State Government wanted 100 per cent of the tax payers up to Rs 1.5 crore turnover to be with States. He termed 90 per cent of the assessees being with States as a victory for protection of small traders.
Parliament passed the landmark Constitutional Amendment in August 2016, and more than half of State legislatures ratified it by mid-September. But the Finance Minister emotionally pointed out that GST needs to be rolled out latest by September 16, 2017. Because, under the Constitutional Amendment passed by Parliament for GST implementation, some of the existing levies will expire after September 16.