Demonetisation another GST headache

Demonetisation and division of turf between central and state officials seem likely to weigh heavily at the two-day Goods and Services Tax (GST) Council meeting beginning on Friday. 

Chaired by finance minister Arun Jaitley, with states' ministers as members, it will debate the four draft GST legislations. Approval to these is needed if they're to be introduced in the ongoing winter session of Parliament, crucial to meet the April 1 deadline for GST rollout.  

The two-day meet might not be smooth sailing, with some states expected to raise stiff opposition over the demonetisation of high value currency. 

"We hope for a consensus to emerge. If the bills are approved, we will try and table it in Parliament by next week," said an official. 

The Centre will aim to create a consensus on the issue of dual control with states, by recommending division of a random five per cent of assessees picked by a computer-based system for audit and scrutiny at the beginning of the year, instead of a division through a turnover-based threshold, termed horizontal division. 

“As in the case of income tax, where the assessee does not know who the assessing officer is, there could be something similar in GST as well," said the official.

While there has been wide consensus between Centre and states against dual administrative control, there have been differences over division of powers. States want sole administrative control over assessees with annual turnover up to Rs 1.5 crore and division of control or cross-empowerment over that. The Centre has had a stiff objection to that and pressed for cross- empowerment for all assessees. It will be recommending a division of only 5% of assesees to be scrutinised. 

"There should be no human interface. The 5% of assesees to be picked randomly for scrutiny or audit by a computer-based GST Network could be divided between Centre and states," said a senior official. 

The Centre has offered alternatives in the draft model GST Bill to sort the turf issue, including the recommendation mentioned. 

West Bengal finance minister Amit Mitra said on Wednesday that the timing was not right for GST implementation, given the impact on state finances because of demonetisation. He said the states were experiencing a huge fall in revenue as demonetisation had hit tax collections from hotels, transportation and small manufacturers.

“There is deep concern that GST will not come to Parliament in a democratic manner. If it comes, it will come as a money bill... In every sphere, the democratic spirit is being violated by the Union government,” Mitra said.

Administrative control has proved to be the most contentious issue in GST,  delaying the finalisation of legislation.