In a significant breakthrough in implementation of India’s biggest tax reform, the deadlock over administration of GST ended today after the Centre agreed to allow states control over most of small taxpayers, but the rollout date was pushed back by 3 months to July 1.
The split of GST taxpayers between the two will be done horizontally with states getting to administer and control 90 per cent of the asseesses below Rs 1.5 crore annual turnover, and the remaining 10 per cent coming under the Centre.
The Centre and states will share control of assessees with annual turnover of over Rs 1.5 crore in 50:50 ratio even as Finance Minister Arun Jaitley insisted that each tax payer will be assessed only once and by only one authority.
Besides ceding control, the Centre also agreed to the demand of coastal states, allowing them to tax economic activity in 12 nautical miles even though constitutionally the Centre has jurisdiction over territorial waters.
“This is a significant headway,” Jaitley said after the meeting.
While a four-rate tax slab of 5, 12, 18 and 28 per cent had already been reached, a consensus on the administration of the Goods and Services Tax – which will subsume central and state levies like excise duty, service tax and VAT – paved the way for finalisation of the draft supporting laws.
Jaitley said the draft of Integrated GST or IGST, the tax which will be levied by the Centre on inter-state movement of goods and services, as well as SGST and CGST will be finalised in the next meeting of the GST Council on February 18.
Once approved, the Council will then decide on taxing various goods and services in different tax slabs, he said.
The stalemate over administration of GST had been holding up consensus in the GST Council since early November with four successive meetings failing to break the deadlock as the Centre was not in favour of a horizontal split. It said states did not have the expertise to administer levies like service tax.
The Centre also did not favour dual agencies auditing and scrutinising each taxpayer as multiple authorities could end up acting at cross-purposes.
With the legislative calendar drawn up, Jaitley said “realistic” date for implementation of GST will be July 1 instead of previously planned April 1.
Since GST is a transactional tax, which is to be levied when a sale takes place, it does not necessarily have to be implemented from the beginning of the fiscal, he said.