In a big step forward on GST implementation, both the Centre and the States on Friday reached an agreement on keeping traders with annual revenue of up to Rs 20 lakh out of the new national sales tax regime that will subsume all cesses.
The newly constituted Council decided to keep the revenue exemption limit at Rs 20 lakh for all States with the exception of north eastern and the hill States where the limit will be Rs 10 lakh, Finance Minister Arun Jaitley said here.
Resolving issues over dual control over small traders, it decided that States will have an exclusive control over all dealers up to a revenue threshold of Rs 1.5 crore in a year. A mechanism will be worked out for traders above Rs 1.5 crore to ensure that a dealer is regulated either by the Centre
or the State Government and not both.
“Above 1.5 crore is concerned, there will be some dual control and cross empowerment of the officers of Centre and State. Which assessee is assessed by whom, will be decided on the basis of a formulation mainly the risk assessment by the Centre and the State, and which of two authorities has a higher risk assessment will assess it. How the control will change officers will assess it,” the Finance Minister said.
On service tax, Jaitley said it was decided in absence of expertise with States, the Centre will continue to exercise control over all the 11 lakh service tax registered dealers irrespective of their revenue levels. The next meeting on September 30 will finalise the draft rules regarding implementation of exemptions.
“While 2015-16 will be the base year for calculating revenue compensating to States for any loss of revenue arising from rollout of GST, the final methodology will be worked out in next meetings,” he added.
The exemption threshold fixed is lower than Rs 25 lakh that most states had demanded. Some states were pitching for Rs 10 lakh limit to limit their revenue loss. The same for North-Eastern States is twice of the Rs 5 lakh that was under deliberation till Thursday.
“The exemption list has also been cut down to 90 items from the current 300 goods and services. Also, the meeting decided that all cesses will be subsumed in the GST,” Jaitley added.
However, Revenue Secretary Hashmukh Adhia said the first meeting of the GST Council was a success and only 5 per cent of the cases will be audited under the GST regime. West Bengal Finance Minister Amit Mitra also said that the interest of small traders has been protected by keeping threshold exemption at Rs 20 lakh. “More than half of the 2.65 lakh businesses in West Bengal will not be paying the new indirect tax, set to be implemented from April 1,” Mitra said, adding that the interest of small traders, small manufacturers will be protected.
The general consensus at the meeting, the Finance Minister said, was that the compensation to be paid to states for any loss of revenue because of implementation of the new regime should be at regular intervals. “It should be quarterly or bi-monthly,” he added.