New Delhi: The Centre and states on Sunday failed to reach a consensus on who will control which set of assessees under GST.
The GST Council will meet again on November 25 to work out the modalities. The informal meeting of Union Finance Minister and his state counterparts was called to break the political deadlock on sharing of administrative control under the proposed goods and services tax (GST) regime.
"The meeting has remained incomplete. Discussions will continue on November 25," Finance Minister Arun Jaitley told reporters after the meeting. Sunday's meeting, which came ahead of the formal meeting of the all powerful GST Council on November 25, was held after the Centre and states were deadlocked over the issue at two previous meetings.
The government aims to roll out GST, which will subsume excise, service tax and local levies, from April next year. Officers of both central and state governments will meet on Monday and try to workout a solution.
States like Uttarakhand, West Bengal, Uttar Pradesh, Tamil Nadu and Kerala have insisted on exclusive control over small businesses, which earn less than Rs15 million in annual revenue, for both goods and services. They feel states have infrastructure deployment at grassroot level and small taxpayers are familiar with state authorities. The Centre, on the other hand, is unagreeable to the demand as it wants single registration mechanism for ease to service taxpayers. Instead of horizontally splitting the taxpayers -- tax payers with Rs15 million revenue with states and those above with Centre -- it has proposed to divide entire taxpayer base vertically, wherein taxpayers are divided between the Centre and states in a fixed proportion.
As a compromise, it is willing to give states administrative power over 2/3rd of the taxpayer base, with service tax continuing to be administered by Centre. An official said the informal meeting was held sans civil servants to arrive at a political solution. Sunday's informal meeting was held sans civil servants to arrive at a political solution.
According to sources, many states including West Bengal, Uttar Pradesh, Kerala, Rajasthan, Odisha and Uttarakhand, said that small taxpayers cannot be harassed by dual control. Rajasthan Urban Development Minister R. Shekhawat said Centre and states are working on different permutations and combinations. Isaac said Centre prefers to have a vertical split of all dealers for assessment under GST. "They are taking a rigid stand but I hope good sense will prevail at the Centre," he said.
The GST Council was earlier discussing five proposals for deciding on jurisdiction, but in the last meeting on November 4, arrived at two options -- horizontal division and vertical division. 'Horizontal Division' would mean taxpayers would be divided both for administrative and audit purposes based on a cut off turnover. Those with a turnover over Rs15 million would be administered both by the Centre and states, while those with below Rs15 million would be administered solely by the state.
'Vertical Division', based on ratios, assigns taxpayers to a tax administration, Centre or state, for a period of 3 years for all purposes including audit. Taxpayers could be divided in a ratio which would balance the interest of the Centre and the states, both with respect to revenue and spread of numbers. States feel they have infrastructure deployment at grassroot level and small taxpayers are familiar with state authorities. Centre, on the other hand is unagreeable to the states' demand of exclusive control over small entities which earn less than Rs15 million in annual revenue, as it wants single registration mechanism for ease to service taxpayers. Instead of horizontally splitting the taxpayers, it has proposed to divide entire taxpayer base vertically. As a compromise, it is willing to give states administrative power over 2/3rd of taxpayer base, with service tax continuing to be administered by Centre.