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The states have unanimously pitched for sole administrative powers to carry out assessment, scrutiny and enforcement for entities up to an annual turnover of Rs 1.5 crore.
The goods and services tax (GST) still faces many challenges and one that stands out is with the issue of administrative control over assessing companies, yet to be ironed out between the Centre and the states.
The states have unanimously opposed the Centre’s proposal of dual control and pitched for sole administrative powers to carry out assessment, scrutiny and enforcement for entities up to an annual turnover of Rs 1.5 crore.
The Centre has, instead, worked out an administrative framework without a threshold, ensuring a taxpayer will have to deal with only one authority for all taxes - central GST, state GST and integrated GST (I-GST).
Finance Minister Arun Jaitley had, in his reply to Trinamool Congress member of Parliament Derek O’Brien in the Rajya Sabha, said the matter was under discussion and would be resolved by November. “Discussions are at an advanced stage and we will find out a solution for that,” said Jaitley.
O’Brien had asked, “The issue of cap of Rs 1.5 crore for dual control is also important. Clarification is required in that regard.”
The states have strongly pitched for the Rs 1.5-crore administrative threshold limit to be included in the GST Act. The states want exclusive administrative power up to the Rs 1.5-crore threshold.
The states want the Centre and states to have powers to assess anything beyond that.
The Centre had, instead, proposed two options to iron out the administrative differences under the unified indirect tax regime.
It had recommended doing away with the threshold altogether. If the states get exclusive control up to Rs 1.5 crore, it had argued, the Centre should get exclusive control over anything above that limit.
To simplify the assessment and adjudication for taxpayers, the Centre proposed “cross-power” model, without a threshold.
Under this, the Centre would initiate action and carry out scrutiny and adjudicate in case it detects a state GST case and vice versa.
Amit Mitra, West Bengal finance minister and chairman of the empowered committee of state finance ministers, had said, after a recent meeting: “Union finance minister heard the consensus very clearly that up to Rs 1.5 crore, small businesses such as a beauty parlour run by a woman or some small businesses of shops should not suffer from dual control of both state and Centre authorities.”
Jaitley did not give any clear assurance that the Centre’s insistence on dual control below the threshold of Rs 1.5 crore would be dropped.
However, there was confidence among states that the Centre would have to cede ground on the issue, as the states were opposing the matter vehemently.
IMPACT & SOLUTION: SECTORAL SNAPSHOT
CONSUMER DURABLES AND FMCG
Impact of GST
Excise duty, VAT/ CST, octroi, entry tax to be subsumed under GST
Cross-utilisation of credits on goods and services in the entire supply chain
What companies should do
Evaluate pricing
Supply chain restructuring
TELECOM
Impact of GST
Decentralised compliance
Multi-state circles a challenge
What companies should do
Evaluate pricing of products
Evaluate processes
ALCOHOL
Impact of GST
Not covered under GST
GST in supply chain would be a cost
Quantum of state tax to be ascertained
What companies should do
Should represent for inclusion in GST
Evaluate pricing for impact due to GST blockage on input side
BANKING
What companies should do
Evaluate pricing of services
Monitor input tax credit on account of increase in base-optimise costs
AUTOMOBILE
Impact of GST
Excise duty, VAT/ CST, Octroi, entry tax to be subsumed into GST
Cross-utilisation of credits on goods and services
What companies should do
Evaluate pricing
Supply chain restructuring
PHARMACEUTICALS
Impact of GST
Cross-utilisation of credits on goods and services
What companies should do
Evaluate continuation of exemptions and pricing
MEDIA
Impact of GST
Cross-utilisation of credits on goods and services
What companies should do
Evaluate pricing
Monitor entertainment tax levied by local bodies
E-COMMERCE
Impact of GST
Tax collected at source — increase in compliance cost
Increase in rate
Complexity due to place of supply rule
What companies should do
Evaluate pricing
Supply chain and reverse logistics restructuring
REAL ESTATE
Impact of GST
Cross-utilisation of credits on goods and services available under GST
What companies should do
Evaluate pricing
Monitor input tax credit on account of increase in base-optimise costs
LOGISTICS
Impact of GST
Redesigning of supply chain by other sectors likely to favour the logistics sector
What companies should do
Tap business opportunities
Supply chain restructuring
Source: EY
Photograph: Reuters
