GST Council Resolves Dual Control Issue; Defers Rollout To July 1
FM Arun Jaitley briefing media after ninth GST Council meeting at Vigyan Bhawan, New Delhi. (Source: @FinMinIndia/Twitter)

GST Council Resolves Dual Control Issue; Defers Rollout To July 1

The Goods and Services Tax (GST) has moved a step closer to reality. The GST Council on Monday ended the deadlock over the contentious issue of dual control – or the division of assessees between states and the Centre.

While states will audit and scrutinise 90 percent of the assessees who have a turnover of Rs 1.5 crore per annum or below, the Centre will assess the remaining 10 percent, Finance Minister Arun Jaitley told reporters after the ninth meeting of the Council.

Those with an annual turnover above Rs 1.5 crore will be equally divided – 50 percent each.

Each assessee will be assessed by only one tax authority, he said.

While the entire services sector has not gone to the Centre for administration, the FM (Finance Minister) indicated that in cases where complex interpretive issues are involved , the Centre might carry out the assessment.  This comes as a relief to the industry as states currently don’t have the experience to handle tax on services
Pratik Jain, Partner, PwC India

L Badri Narayanan, Partner, Lakshmikumaran & Sridharan said it will be “interesting to see how this sharing of administration is going to be effected in practice”. It is also “not clear if the division of administration for large taxpayers is going to be on the basis of revenue or type of supply or some other basis”, he added.

GST Council Resolves Dual Control Issue; Defers Rollout To July 1

West Bengal was the only state to oppose the new structure, and demanded 100 percent control over all businesses with an annual turnover of less than or equal to Rs 1.5 crore.

Jaitley said given the consensus on dual control, the realistic deadline to roll out the GST regime will be July 1, 2017.

“A well thought through implementation post meticulous discussion on the draft legislation is far more desirable than a premature rushed-through roll out,” said Rajeev Dimri, Leader, Indirect Tax, BMR & Associates. “Even to achieve the deferred date, finalisation and publication of GST laws without further delay would be important for India Inc to effectively prepare for migration to the new regime.”

Tax On Territorial Waters

The Council also resolved the issue of tax on high seas. States will be empowered to tax any economic activity in territorial waters up to 12 nautical miles, Jaitley said.

“As far as the area of 12 nautical miles into the territorial waters is concerned, it's part of the Union government’s territory but as per the convention, states will be empowered to collect tax on any economic activity. This decision has been taken after very wide consultation,” he said.

Narayanan cautioned there has been a lot of “litigation on what taxes apply to such transactions.  This is likely to be a contested area in the future”.

The power to levy and collect Integrated GST (IGST) will lie with the Centre, Jaitley said, adding that by a special provision in law, states will also be cross-empowered.

The draft legislations will now be firmed by officers, and will be tabled again on the next meeting of the GST Council scheduled for February 18.

The only items to be dealt with are approval of draft bills and rules and setting of rates for different commodities, Jaitley said.

Resolution of contentious issue of dual control will now allow the Centre to focus on more important issues like fitment of various goods and services to specific tax rates already approved by the GST Council.
Satya Poddar, Tax Partner – Policy Advisory Group, EY

Delaying rollout till July 1 will also provide the taxpayers as well as the government additional time for proper implementation of the new indirect tax regime, Poddar said.

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