Making an apparent attempt to woo small traders, the SAD-BJP led Punjab Government on Tuesday pitched for a threshold limit of Rs 25 lakh for levying Goods and Services Tax (GST).
“We have suggested that the threshold limit of Rs 25 lakh should be fixed for imposing GST so that small traders should be kept out of this taxation system,” said State Finance Minister Parminder Singh Dhindsa.
The recommendation of making Rs 25 lakh as threshold limit for levying GST was made by the State Government at a meeting of Empowered Committee of State Finance Ministers in the national Capital, presided over by Jammu & Kashmir Finance Minister Abdul Rahim Rather.
Supporting its demand, the Punjab Government contended that small traders or dealers should be kept out of GST system whose contribution to tax revenue was “minimal”.
Dhindsa said that almost 60 per cent of traders in the country with up to annual turnover of Rs 25 lakh contribute only two to three per cent of total tax mobilisation. “It was impossible for small traders to maintain books of accounts to deal with departments of both State and Central Governments. That is why we suggested that traders with up to Rs 25 lakh of turnover should be kept out of GST,” he said.
Asserting that the SAD-BJP government would always stand with the trading community, Dhindsa said that only Punjab vociferously demanded Rs 25 lakh as a threshold limit for GST in the meeting.
“We were the only state which demanded Rs 25 lakh as threshold limit in the meeting while Haryana suggested for Rs 20 lakh limit. Rest of other States including Maharashtra and Karnataka were seeking lower threshold limit of Rs 10 lakh,” he claimed.
Expressing its reservations on the constitutional validity of the proposal aiming at changing GST’s present structure, Dhindsa maintained that the same would “go against the basic principles of GST that the tax should be destination based”.
He said that the proposed flow of funds from GST would reduce the revenue of the divisible taxes between various States. Seeking destination-based tax, Dhindsa said that the “destination principle” would reduce imbalance in industrial development as to reduce costs of freight and industry would be established close to consumption areas.
Dhindsa said that the ‘destination principle’ of the proposal would result in cost effectiveness and reduction in price so it is beneficial to the consumer and should be adopted.
Meanwhile, the Empowered Committee insisted that the threshold turnover for levying GST be retained at Rs 10 lakh and petroleum be kept out of the purview of the new tax regime.
The Empowered Committee of State Finance Ministers, however, expressed hope that the GST could be rolled out by April 1, 2016, notwithstanding the hitches.
“In September, the Centre wrote to us suggesting that this decision of the Empowered Committee should be reviewed. The Centre suggested that the limit should be Rs 25 lakh. Even if it is not Rs 25 lakh, Rs 10 lakh limit should be increased,” said Dhindsa.
He added that finally, the Committee took a decision that they will go by the decision that is already taken that is Rs 10 lakh,” GST Empowered Committee chairman Abdul Rahim Rather said, adding that the final call on threshold will be decided by the GST Council.
In the Empowered Committee’s last meeting on August 20, several states had pressed for threshold limit of Rs 10 lakh for imposing GST. Once the GST is implemented, it will subsume indirect taxes like excise duty and service tax at the Central level and VAT on the States front, besides local levies.