GST: A circular that could lead to turf war between states and centre

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In what may lead to a turf war between central and state governments, a directive issued by a state commissioner asked its officers to take action against tax defaulters without bothering about jurisdiction.

Andhra Pradesh’s chief commissioner of state tax on August 23, issued a circular empowering the state case officers to take action if they detect tax evasion based on intelligence inputs even in companies that fall under central tax administration. This could mean that companies may have to face scrutiny from two separate tax authorities—something that Goods and Services Tax (GST) regime had hoped to avoid. Unlike the earlier tax regime GST is a consumption based tax. Which means that the tax has to be paid in the state where consumer is based. GST, say industry trackers, would lead to a situation where some states that yielded benefits merely by offering sops to companies will lose out on indirect tax revenues.

On the other hand some of the poorer states (as they collected lesser taxes earlier) would generate more revenue under the GST. Tax experts had predicted that richer states, like AP, Tamil Nadu, Maharashtra and Gujarat, may get aggressive as they could see fall in their indirect tax collections.

The circular may just set a precedent and could lead to other states following the lead. The trigger of the circular seems to be cases where companies were not paying state goods and services tax (SGST). These companies however were paying central goods and services tax (CGST).

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