GST Hiccup: Centre And States Split Over Sharing Administrative Responsibilities

In yet another impediment to the proposed Goods and Services Tax (GST) bill, the centre and the states were unable to arrive at a consensus yesterday (5 November) over sharing administrative responsibilities within the realm of the GST.

At the end of the fourth GST council meeting in Delhi, states sought sole control over small tax payers with earnings less than Rs1.5 crore in annual revenue, for both goods and services. Giving in to this demand would amount to a reduction in the number of traders who come under the purview of the central tax authorities.

A way out of this will have to come along with a compromise, and may require political intervention – the reason why Finance Minister Arun Jaitley has called for an informal meeting of state finance ministers on 20 November to thrash out a solution.

Two options that are being explored are: Splitting up the tax base with tax payers below a threshold of Rs1.5 crore come under the purview of the states and those above, under the control of the centre, which however is not backing this. The other alternative is to divide the tax base in such a way that taxpayers are shared between the centre and the states in a fixed proportion.