The Centre had mooted a detailed administrative framework without any threshold of exclusive state jurisdiction and also ensuring that a taxpayer has to deal with one authority for all taxes.
NEW DELHI: States have pitched for the rotation of taxpayers with turnover in excess of Rs 1.5 crore selected on a random basis every three years between themselves and the Centre once the goods and services tax (GST) is rolled out.
This follows the Centre’s suggestion on sharing of tax administrative functions without any duplication of taxpayers reporting to both sets of authorities, which could cause hardship to taxpayers.
The move is significant in the context of talks regarding the tax administration framework under GST.
The Centre had mooted a detailed administrative framework without any threshold of exclusive state jurisdiction and also ensuring that a taxpayer has to deal with one authority for all taxes — central GST, state GST and integrated GST (I-GST).
States, however, did not find the proposal palatable and strongly backed exclusive control up to Rs 1.5 crore and dual control above it.
The Centre and states will finalise the administrative structure for GST after the passage of the constitutional amendment bill that will pave the way for the levy to be taken up in Parliament on Tuesday. As of now, the GST model law contemplates separate audit and appellate proceedings under central and state GST.
“There should not be any duplication. A taxpayer would find it difficult to deal with two assessing authorities,” said a senior government official, adding that this issue would be decided when the GST law is finalised in consultation with states.
The government is keen to introduce this comprehensive indirect tax reform that will create a seamless national market by levying one simple tax in place of central taxes such as excise duty and service tax and state levies like value added tax, octroi and entry tax. GST is set to be rolled out on April 1next year.
The passage of constitutional amendment bill and its subsequent ratification by 50% of state assemblies will give states the authority to tax services and allow the Centre to levy tax on retailing goods.
The Centre would then have to adopt a GST law as also an integrated GST law while states will have to bring in state GST laws.
At the last meeting of the empowered committee of state finance ministers, states backed exclusive control of administration for goods and service providers having turnover of up to Rs 1.5 crore, saying that allowing the Centre to administer those below this level could hurt small traders and shopkeepers. The value added threshold is Rs 10 lakh in most states.
Service tax is levied on those having an annual turnover above Rs 10 lakh. Incidentally, about 92% of service tax assessees fall in the Rs 10 lakh to Rs 1.5 crore bracket, implying the bulk of the work load will fall on the states.
Excise duty, levied at factory gate, is imposed on annual turnover of Rs 1.5 crore and above although there is a registration requirement for those below this to ensure there is no misuse of exemptions available to SSIs.
“This will have to be worked out so that taxpayers do not suffer,” another official said. Tax experts say it’s better to minimise the interface to a single authority.
“Having one body for assessments, audit and appeals would be simple and cost efficient for industry as well as government,” said Pratik Jain, partner, PwC India. “It will also be a huge boost for the ease of doing business and Startup India campaigns of the government.”
“Given the federal and state-level structure of Indian GST, there are bound to be complications in the administration of these taxes,” said Bipin Sapra, partner, EY.
“However, in the interest of an efficient administration and ease of doing business, both the Centre and states have to give up some of their individual controls on GST business processes of registration, audit and investigation and have an effective single control over the taxpayer.”