In order to iron out administrative differences between the Centre and states over the proposed goods and services tax (GST) regime, the Central Board of Excise and Customs (CBEC) has formed a committee to identify the key concerns and sort them out through dialogue. The issues include administrative threshold as well as revisionary powers.
“There are a lot of square brackets or what are called unresolved issues with respect to the proposed GST, which may create hassle for the taxpayers. Therefore, the committee has been formed to look into each of these issues and take them up with the states,” said a government official.
The empowered committee of state finance ministers in a meeting in Kolkata last month discussed the model GST draft law, which was also made public for comments. The committee is headed by GST member Ram Tirath.
The states have strongly pressed for all administrative powers, including assessment, scrutiny and passing of orders, for entities with annual turnover up to Rs 1.5 crore. This will essentially mean that almost all service tax cases, barring those of big entities, will remain with the states. This has not gone down well will many central agencies. Moreover, for entities with annual turnover of more than Rs 1.5 crore, both states and Centre are likely to have assessment powers.
States, including Gujarat, Maharashtra, West Bengal, Tamil Nadu and Karnataka, are pressing for authority over tax assessment and dispute resolution for entities with annual turnover up to Rs 1.5 crore. According to states, this will ensure that small businesses are not harassed because of dual control.
Central official pointed out that the draft model GST law was not final and further changes could be made considering feedback from all stakeholders, including the public. The Centre also ceded to the states’ demand of revisionary powers for three years, compared with three months in the current central law.
According to the central indirect tax laws, senior officials can revoke the order passed by the junior authority within three months, as against three to five years in case of some states. This move could lead to an increase in uncertainty for the tax assesses, resulting in harassment in some cases.
The draft model GST law proposes that revisionary powers could not be invoked, if “more than three years have expired after the passing of the decision or order sought to be revised”.
“Some things are good in central acts and some in state acts. However, GST seems to be incorporating the worst of the two, with states unwilling to relent to Centre’s recommendations. Centre has a better system of review,” said an officer.
Lack of parity is another contentious issue. At the state level, one commissioner-equivalent officer will handle entire GST-related work, whereas Centre will have much senior officials and chief commissioners in states for the unified indirect tax regime. “Chief commissioners have a service of 30-32 years as against 16-17 years for state commissioners. How can they be put at par? In case of litigation, there could be duplication. With two levels of officers, whose order becomes binding is a concern,” another official pointed out.
Centre also pressed for a higher GST exemption threshold of Rs 25 lakh annual turnover, but ceded to states’ demands of a lower one at Rs 10 lakh in the draft model law. According to government data captured two years ago, while units between Rs10 lakh and Rs 25 lakh annual gross revenue comprised 60 per cent of total dealers, they contributed to just two per cent of average national tax revenue.
In fact, Chief Economic Advisor Arvind Subramanian batted for an even higher threshold at Rs 40 lakh in his GST report to ensure compliance while minimising the burden on small taxpayers. Currently, small-scale industries, with an annual turnover of up to Rs 1.5 crore, are exempted from central excise duty, while that for VAT and service tax stands at Rs 10 lakh.