The new division of administrative control between the Centre and the states under the goods and services tax (GST) will ensure that around 1.4-1.5 million taxpayers remain under the purview of the Central Board of Excise and Customs (CBEC) in the new indirect tax regime.
After states demanded a larger pool of taxpayers to administer in the initial round of negotiations in the GST Council, the CBEC was threatened with redundancy leading to a prolonged face-off with states.
If the Central government had accepted the states’ initial proposal on sharing of administrative powers, the Centre would have been left with only a small pool of 0.7 million taxpayers to administer.
The estimated number of total active indirect taxpayers (including those paying value-added tax or VAT, service tax and excise) is around 10 million, of which around 0.4 million are common to the Centre and the states. This leaves around 9.6 million taxpayers, of which around 6.6 million are VAT assessees, 2.6 million are active service tax assessees and some 0.4 million assessees are registered under excise.
But a majority of the 9.6 million tax assessees are below the annual revenue threshold of Rs1.5 crore. Only around 1.4 million assessees have an annual revenue of more than Rs1.5 crore.
In addition, around 5.3 million of these taxpayers will be under the revenue threshold of Rs20 lakh under GST, which means they will be exempt from registering under GST.
Also, many exempt taxpayers who supply to bigger manufacturers may opt to voluntarily register under GST. The government is estimating that there will be around 8 million taxpayers under GST initially.
On Monday, the Centre and the states decided on sharing administrative powers.
“The new arrangement will mean that officers of the state and the centre will have enough work,” said one of the government officials who attended the meeting.
Another official said that the Centre may pretty much have the same taxpayer base to administer under GST as compared to the current regime if one takes out taxpayers below the Rs20 lakh threshold. This is because though the excise duty exemption threshold is Rs1.5 crore, it is Rs10 lakh for service tax. This means that many of the 2.6 million active service tax assessees may opt not to register under GST.