Centre wants a fresh look on low GST threshold

Wants limit be kept high as cost of collection of revenues from small traders and dealers is disproportionately high as compared to revenue collected from them

The Centre is against keeping the threshold limit at Rs 10 lakh for levying GST and wants the committee on dual control to take a final view on the matter after detailed discussions.

The Centre in a communication to the state Finance Ministers has suggested that the meeting of the Committee on Dual Control, Threshold and Exemptions be convened at the earliest for "detailed discussion and analysis" of the issues concerning the threshold limit.

It has argued that the limit be kept high as the cost of collection of revenues from small traders and dealers is disproportionately high as compared to the revenue collected from them.

Quoting an analysis, the Centre said: "States are collecting just 2% of their revenue from traders/ dealers having their annual turnover between Rs 10 lakh and Rs 25 lakh, while this group comprises nearly 60% of all their tax payers."

Moreover, it added, keeping the threshold limit at Rs 10 lakh would mean that any dealer with a daily turnover of Rs 2,800 would come under the GST net.

While the Centre is of the view that the threshold for levying Central GST (C-GST) and the State GST (S-GST) be kept at annual turnover of Rs 25 lakh, some smaller states want it to be at Rs 10 lakh.

The Empowered Committee, however, is in favour of keeping the limit at lower level, meaning that any business establishment with an annual turnover of Rs 10 lakh will come under the ambit of the Goods and Services Tax (GST).

The GST will subsume indirect taxes like excise duty and service tax at the central level and VAT on the states front, besides local levies.

The GST Constitutional Amendment Bill, which was introduced in the Lok Sabha in 2011, had lapsed and the NDA government will be required to come up with a fresh bill.

The Empowered Committee also reviewed the revenue neutral rate for the GST, comprising C-GST and S-GST, as suggested by a GST sub-committee.

A sub-panel on GST has suggested that that revenue neutral GST rate be pegged at about 27%, with the C-GST at 12.77% and S-GST at 13.91%.

The NDA government is likely to introduce the GST Bill in the ensuing Winter session of Parliament, beginning November 24.