New Delhi: The goods and services tax (GST) is set to be rolled out from 1 July after the centre and the states struck a consensus on the contentious issue of sharing of administrative powers.
The way is now clear for the Union government to table the associated bills in the second half of the upcoming budget session of Parliament commencing from 31 January. To be sure, there are other issues that need addressing; for instance, the GST council will have to also resolve the various tax slabs.
At the end of the ninth GST council meeting on Monday, both sides agreed to work towards meeting the new deadline and sharing administrative control over small and big taxpayers in a fixed ratio.
Both, but especially the centre, conceded some ground to generate a consensus on this long-pending issue that was threatening to derail the implementation of the singular piece of tax reform which will, for the first time, economically unify the country.
The centre had earlier targeted a rollout on 1 April.
“There was a significant headway in today’s meeting,” said Union finance minister Arun Jaitley, adding that the council was of the view that it may not be easy to implement GST from 1 April given the work that is remaining.
“Industry also needs to be given time to prepare for GST rollout. So GST council is of the view that 1 July may be a more realistic target.”
There will be an estimated 8 million taxpayers under GST.
As per the agreement arrived between the centre and the states, small taxpayers with an annual revenue of less than Rs1.5 crore under GST will be divided between the states and the centre in the proportion of 90:10 for the purpose of scrutiny and audit. This will be done randomly.
All taxpayers above this revenue threshold will be equally shared (again randomly) between the centre and the states. The divisions will also not make a distinction between goods and services.
For intelligence-based assessments, powers of scrutiny and audit will be shared between the centre and the states.
Further, through a special provision of the law, states will also be empowered under integrated GST (IGST) law to administer taxpayers in the ratio mentioned above. At present, the power to levy and collect IGST is with the central government.
The centre also yielded to the states’ demands for taxation powers in territorial waters up to 12 nautical miles in the IGST law.
ALSO READ | Demonetisation and budgets: all in the mind
All states except West Bengal agreed to this new formula, said Jaitley, adding that West Bengal finance minister Amit Mitra “disagreed to the limited extent of sharing of small traders in the ratio of 90:10 and wanted the division to be 100:0”.
K. Pandiarajan, Tamil Nadu’s representative in the GST council, said the division is reflective of the on-ground resources of the centre and the states, though some states would have preferred a larger pool of the bigger taxpayers.
In the next meeting of the GST council on 18 February, the council will finalize the draft laws—the central GST law, the state GST law and the IGST law—after incorporating the changes that have been agreed upon. Thereafter, the time-consuming task of assigning items to different tax slabs will begin. Information technology systems also have to be readied to meet the implementation date.
Finalizing the rollout date helps the government incorporate GST revenues in its budget calculations.
“Excise and service tax collection will be budgeted for three months and GST for the remaining 9 months,” said a senior finance ministry official, adding that the GST numbers will be calculated on the assumption that the rates will be split equally between the centre and the states.
Harishanker Subramaniam, national leader, indirect tax, EY India, said the stage is now set for introduction of GST bills in Parliament and state assemblies in February/March. “It is now clear that the new date for GST implementation will be 1 July 2017, which gives some time for industry to prepare. It’s indeed a very positive development and takes GST journey forward,” he said.