Issue of Dual Control between the States and Centre needs immediate focus for GST Roll Out

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While the Government had earlier set the ambitious target to implement GST from April 2017, the likelihood of getting GST rolled out from April this year looks bleak.

Article by Vinay Sethi, Head of Market Development for Global Tax, Thomson Reuters India.

While the Government had earlier set the ambitious target to implement GST from April 2017, the likelihood of getting GST rolled out from April this year looks bleak. However, there is a strong possibility that India would witness GST rollout in 2017latest by September of this year.

Much has been spoken about the 16th September impasse before which the Government needs to implement GST or it stands to lose the statutory power to continue with the imposition of existing taxes. However, the Government would still have the option to continue with the levy of present taxes post 16th September in the rare event of it being unable to introduce GST within the stipulated timeline. The Government has an option either to revisit the Parliament for status quo ante or to request for an extension before the President.

Since inception of the GST council last year, eight meetings have already taken place during which most of the issues between the States and Centre got resolved and the Government has now been able to reach a broader consensus on the model GST legislations and the same have been sent to the Ministry of Law for review.

However, dual control or cross empowerment issue still remains a point of contention between the Centre and the States and the Government has not been able to break this logjam despite having discussed the issue in several meetings. The dual control issue is all about division of tax administration between the States and the Centre, particularly for turnover up to INR 15 million as States desire to have absolute control over such assessees which include service tax payers where upon the Centre presently has the exclusive control.

Additionally, a new issue of jurisdictional power of the States on territorial water has emerged as the State Governments believe that the power to levy taxes on such transactions rest with them while the Centre considers otherwise. Currently under existing tax regime also, the issue is sub judice before the Supreme Court. The matter has now been referred to the Ministry of Law and hopefully the Government will be able to find a solution sooner than later. All eyes remain glued to the next GST council meeting and on the forthcoming Union Budget, scheduled on 1st February. Industry would also be looking forward for a firm timeline for GST rollout.

Once the few open issues are resolved and the go ahead from Ministry of Law is received on the draft legislations, GST Council needs to pass the law and thereafter the same will be put up before the Parliament and the State Legislatures paving the way for introduction of GST. Judged by any yardstick, the Government has made remarkable progress.

Source: http://www.financialexpress.com/economy/issue-of-dual-control-between-the-states-and-centre-needs-immediate-focus-for-gst-roll-out/507755/

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