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State FMs demand Rs10 lakh threshold for levying GST

The Empowered Committee of state Finance Ministers on GST which met on Wednesday also recommended to the Centre that states be given the legal powers to collect tax from businesses with an annual turnover of up to Rs 1.5 crore.

‘About dual control, Empowered Committee decided to recommend to the central government that for threshold of Rs 1.5 crore, Centre will not interfere in assessment, in audit, in other matters. It will be left exclusively to states. But officials from Centre insisted that only administrative control will be given to the states. The states insisted that legal powers should also be given to the states to the extent of Rs 1.5 crore so far as CGST is concerned,’ Empowered Committee Chairman Abdul Rahim Rather told reporters.

The contentious issue of dual control of traders — by both the Union government and state governments — in GST structure, would be that taxpayers with annual turnover of over Rs 1.5 crore would be taxed by the Centre, which will later disburse to states their share. Those with turnover below Rs 1.5 crore would pay their taxes to states, which would subsequently pass on to the Centre its share.

As per the recommendation, GST would not be imposed on businesses with annual turnover of less than Rs 10 lakh. Currently the threshold for Value-Added Tax (VAT), it is Rs 10 lakh in most states. ‘So far as threshold limit is concerned, it was decided that it should be Rs 10 lakh in respect of general category of states and Rs 5 lakh for special category and NE states,’ Rather said.

As regards the items exempted from the purview of GST, the Committee suggested that they should be mentioned in the Constitutional Amendment Bill. States have already told the Centre that items like petroleum and tobacco would be kept out of GST. On compensation for phasing out of Central Sales tax (CST), Rather said that Rs 13,000 crore has been pending as on March 2010.

Gujarat Finance Minister Saurabhbhai Patel urged the Empowered Committee to take a balanced view in the proposed dual control by both state and Central authorities, along with sustainability of states revenues and ease in compliance for small traders while rolling out the GST. .

This was the first meeting of the Empowered Committee of state FMs after the presentation of Budget by the new NDA government. The GST rollout has missed several deadlines because of lack of consensus among states over certain crucial issues on the new tax regime. The GST will subsume indirect taxes like excise duty and service tax at the central level and VAT on the states front, besides local levies.

Earlier this month Tamil Nadu Chief Minister J Jayalalithaa had written to the Centre that the present GST Bill is unacceptable to the states and also raised concerns on certain aspect. Rather said Tamil Nadu’s concerns are likely to be ironed out with effective compensation mechanism. The GST Constitutional Amendment Bill, which was introduced in the Lok Sabha in 2011, has lapsed and the NDA government will be required to come up with a fresh bill Union Finance Minister Arun Jaitley has said that the government will try to bring in the new GST Bill in the Winter session of Parliament.

On this Rather said, ‘We are hopeful that as the Finance Minister said it will come in the Winter session.’

CST, a tax imposed on the inter-state movement of goods, was reduced from 4 per cent to 3 per cent in 2007-08 and further to 2 per cent in 2008-09 after the introduction of Value-Added Tax (VAT). The Centre had then promised the states that it would bear losses due to reduction of CST.
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