NO CONSENSUS ON GST ADMINISTRATION

[Dr. Sanjiv Agarwal]

GST may suffer at the cost of recent demonetization of high vale currency announced by the Government which came just before the scheduled winter session of Parliament from 16^th November, 2016.

To oppose demonetization, almost entire opposition has united to corner and question the Government. We have already witnessed loss of first week in the four week current session.

The trailer came yesterday with the informal meeting of all Finance Ministers of states and union ending in just two hours on Sunday without any result or positive conclusion. Not only this, the two day meeting of the GST Council scheduled for 24-25 November, 2016 has been reduced to be one day affair which will now meet for a day on 25^th November, 2016 only.

 States have not agreed for dual control of all assessees and want power for exclusive control of all assessees including Service Tax upto ₹ 1.5 crore. Since no consensus could be reached, positive outcome of 25^th November meeting is also in limbo. States like West Bengal,  Uttar Pradesh, Uttarakhand, Kerala, Karnataka etc. have opposed such move and want sole control over adjudication, audit etc for dual assessees. Centre is agreeable on goods but desirous to retain Service Tax assessees. The draft of legislation is also to be approved by   the GST Council before it goes to the Parliament.

So far as division of jurisdiction is concerned, there are two options being discussed now. 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 ₹ 1.5 crore would be administered both by the Centre and states, while those with below ₹ 1.5 crore 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 three years for all purposes, including audit.

It is learnt that the Centre is keen on a vertical split wherein certain percentage of taxpayers are under central administration and the balance under the states. The percentage could also be the sticking point in this case and the Centre is willing to give a bigger share to states to settle the issue. The Centre and states have already agreed to a four-slab GST of 5%, 12%, 18% and 28%. It has also been agreed that the Centre and the relevant state will split these taxes evenly.

What is more important is that this meeting of Finance Ministers was convened to have sail through in the Council meeting. With this break-up, consensus at next meeting also seem to be doubtful.

It now seems that the few opposition parties may not be seriously interested in GST coming in April, 2017 and their major concern and attention may be to address fall out of demonetization. These parties may be impacted but they are opposing it in the guise of inconvenience and hardship to poor and common people.

It appears that chances of GST roll out from April, 2017 seems to be bleak as Government struggles with demonetization's political fallout. With the present opposition, any talks on GST may be futile. If not April, then let's hope for September, 2017 which is the ultimate dead line. Better late than never. By then, effect of demonetization will also stabilize.