GST sees divisions on threshold, panel to be set up to resolve issue

While some states favoured Rs 10 lakh turnover a year, others advocated 25 lakh; Jaitley may name the chairman of the panel at the next meeting in December

The proposed national goods and services  tax (GST) continues to face obstacles, as seen on Friday, barely a week before Parliament is to begin its winter session where the constitutional amendment to enable it is to come  up. At a meeting of the empowered committee of state finance ministers (EC) on the tax, there were clear divisions on the threshold above which a GST should apply.

A committee chaired by the government's chief economic advisor, Arvind Subramanian, is to soon give its recommendation on the GST rate. The finance  ministry has said a high rate would be counter-productive.

At the EC meeting, many felt the rate could be fixed at 18 per cent. Some such as Punjab, Chhattisgarh and Delhi were agreeable to the Union government proposal for the threshold at Rs 25 lakh annual turnover of a company; others wanted Rs 10 lakh. "There was divided opinion," Delhi's deputy chief minister and finance minister, Manish Sisodia, told  reporters after the meeting. He was elected chairman for the day -- K M Mani, the chairman till now, has resigned as finance minister of Kerala over corruption charges.

Sisodia said Finance Minister Arun Jaitley would select the next chairman at the next meeting, expected next month.  Sisodia decided a sub-committee should be formed to have enough data on threshold levels, so that a decision could be based on facts, not "states' prejudices". The sub-panel is expected to give its report before  the  next EC meeting.

Punjab finance minister P S Dhindsa said those favouring Rs 25 lakh of turnover argued that the cost  of administration would  go up if lowered to Rs 10 lakh. While 60 per cent more assessees would come  under the net, revenues would go up by only four to eight per cent.  He said there was also no unanimity over a threshold  for a composite GST. Punjab wanted it at Rs 75 lakh a year but many want it at Rs 25 lakh.

Later, economic affairs secretary Shaktikanta Das said a high GST rate would be counter-productive. Sisodia said simple rules and administration was more important than just low rates. A sub-panel of the EC had earlier suggested close to a 27 per cent GST rate. This was referred to the National Institute  of  Public Finance  and  Policy. Later, the Subramanian panel was formed. Fixing the rate is actually for the proposed GST Council, to be set up once the Constitutional amendment is passed. The government is much short of the needed votes in the Rajya Sabha.

Asked whether a GST would be implemented from  the coming April, when the next financial year begins, Sisodia evaded a direct reply. "It is hard for me to say when the bill is yet to be cleared by Parliament," he said."