Centre, states divided on who will control GST

Jaitley, state FMs to meet on Nov 20 for political solution

A day after reaching a consensus on tax rates, the GST Council on Friday failed to arrive at an agreement over the crucial issue of administrative control over assessees under the new indirect tax regime.

“No decision was taken,” Finance Minister Arun Jaitley told reporters after the meeting.

He said clear guidelines on complex and contentious issue will be required. Therefore, further discussion is required on the matter. The finance ministers will have an informal meeting on November 20 to discuss it and have a political solution on the matter. The November 20 meeting will not be of the GST Council and will be held without officials.

Jaitley said, “We can’t have two competing assessing authorities for the same assessees.”

He said two models were discussed to divide the administrative control between the Union and state governments. One of these was horizontal model, whereby states will have sole control over entities earning up to Rs 1.5 crore a year and dual control of the Centre and states over this level.

The other was vertical model whereby both the Centre and states will have control over assessees right from the beginning. This model is called “cross empowerment” too. The assessees for scrutiny and audit will be divided in a pre-decided ratio between the Centre and states, be it a 50:50 or some other ratio, 75:25.

The earlier agreement reached between the Centre and states over horizontal model had fallen apart after states expressed keenness to have control over service tax assessees in certain areas such as entertainment tax. According to an earlier proposal, states were to assess businesses with an annual turnover Rs 1.5 crore, while both the Centre and states were to do so for businesses with higher turnover. The Centre and states had earlier agreed that the Centre will have exclusive power over assessees in the services sector, till the state officials were trained to do so. But some states raised objection to this.

The GST Council meetings, which were supposed to happen on November 9 and 10, have been put off till November 24 and 25. Those meetings will discuss model GST Bills.

When asked whether the government will be able to meet the April one, 2017 target to roll out GST under this scenario, Jaitley said,"We hope so. We will try and approve the GST drafts on November 25."

He said efforts are on to pass IGST, CGST Bills in the winter session of the parliament.The draft GST legislation and the compensation Bill will be decided by November 15 and states could consider it, he said.