NEW DELHI: It is likely to be a stormy Friday at Vigyan Bhawan where the Centre and the states will tackle at least three contentious issues even as they agreed to try and roll out goods and services tax from April.
Already, deciding the thresholdfor imposing GST is proving to be a tough task, given that states such as Uttar Pradesh, Tamil Nadu and those from the North East believe that keeping units with a turnoverof under Rs 25 lakh outside the cap will result in massive revenue loss. For the north eastern states, this threshold would mean that 80-85% of the units would be out of the tax net. Uttar Pradesh, which said that around 8% of the units would go out of the net, also argued for keeping the threshold at Rs 10 lakh.
“With regard to composition (scheme) we have finalised our proposal which has been unanimously accepted by the members. With regard to threshold for exemptions, there are two sets of suggestions which have come. We have converged those two different views… we will continue the meeting tomorrow and thereafter, so that we are able to converge to one particular figure as far as the exemptions are concerned,” finance minister Arun Jaitley told reporters.
Revenue secretary Hasmukh Adhia said a consensus on compounding or composition scheme was reached which decided that traders with gross turnover of up to Rs 50 lakh will pay 1-2% tax. The scheme provides for an easier method of calculating the tax liability by allowing option for GST registration for dealers with turnover below the cut-off to opt for compounding and avoid the “normal track”, which comes with more paperwork.
While the other two controversial issues -the compensation formula and the demand for state control over units with turnover are yet to be decided -will be discussed on Friday, state finance ministers indicated that there was a wide gap in the Centre and the states’ stand. For instance, the finance ministry has proposed that the average revenue growth for the previous three years be taken to calculate the compensation formula. Ministers from Kerala and Tamil Nadu instead want the average for the best three out the last six years to be taken to calculate the average growth. This will result in the possibility of the Centre having to shell out higher compensation, something that it is not keen on.
On the issue of cross-empowerment, several states led by West Bengal want that units with turnover of up to Rs 1.5 crore to be under the exclusive domain of states for audit and collection purposes. Again, this is not acceptable to the Centre.