At the end of the fourth round of meeting of the GST Council, the Centre and states failed to arrive at a mutually acceptable dual control structure.
“Functionally you cannot have more than two competing authorities for the same assessee. There needs to be clearly defined guidelines as to who will assess whom,” Finance Minister Arun Jaitley said at a press briefing after the Council meeting.
The finance minister said two points of view emerged at the meeting on how to divide the assessee base between the Centre and the states. One suggestion was to divide the base of assessees horizontally, between the Centre and the states, with threshold of Rs 1.5 crore turnover. The other suggestion was to divide base of assessees vertically without a threshold.
A vertical assessment structure, if implemented, will be an unfortunate thing, Vineet Agrawal, group head of tax at JSW Steel said in a telephonic interview.
Within a state, two different dealers in the same sector will get assessed by two different administrations. States and the Centre will take different views on the same issue. One solution to this could be setting up a GST unit like you have Large Taxpayer Unit in Mumbai. It will be a one-window solution where the state and central cadres can come together. They can have their representatives in this unit and do a combined assessment. Assessees don’t want to deal with different administrations. If there is GST unit with officers of both Centre and states, direction on an issue in a particular state will be consistent.Vineet Agrawal, Group Head-Tax, JSW Steel
PwC Tax Partner Pratik Jain says a vertical division is more likely to be implemented.
To me, it seems that a horizontal split (wherein dealers below Rs 1.5 cr were to be under exclusive control of States) was under the assumption that service sector would fall under the domain of Centre. However, now since it seems that service industry would also be split between Centre and states, it is unlikely that Centre would agree on a horizontal division. Therefore, a vertical division (on an agreed ratio) seems to be the more realistic outcome. Whatever is the case, industry will like the fact that they will only need to deal with one authority.Pratik Jain, Partner, PwC India
Currently, the VAT exemption limit varies across states between Rs 5-10 lakh, the service tax threshold stands at Rs 10 lakh while the threshold for central excise duty stands at Rs 1.5 crore. The GST Council had agreed, in a previous meeting, on Rs 20 lakh per annum as the standard threshold for GST exemption and Rs 10 lakh per annum as the threshold limit for 10 states, of which seven are North-Eastern. Therefore, the number of assessees itself will reduce under the new regime, Jaitley told reporters.
There will be an informal meeting of ministers on November 20 to seek political solutions on the dual control issue, the finance minister said. The GST Council will formally meet again on November 24-25 when the four draft preparations – CSGT, IGST, SGST and the compensation law – will be taken up.
The finance minister also said that effort is on to pass the IGST and CGST Bills in the winter session of parliament.