The state Finance Ministers today resolved to lower the threshold limit for imposing Goods and Service Tax (GST) from Rs 25 lakh to Rs 10 lakh, and asked the Centre to include the provision for GST compensation in the Constitutional Amendment Bill.
The Empowered Committee of state Finance Ministers on GST which met today also recommended to the Centre that states be given the legal powers to collect tax from businesses with an annual turnover of up to Rs 1.5 crore.
"About dual control, Empowered Committee decided to recommend to the central government that for threshold of Rs 1.5 crore, Centre will not interfere in assessment, in audit, in other matters. It will be left exclusively to states. But officials from Centre insisted that only administrative control will be given to the states.
"The states insisted that legal powers should also be given to the states to the extent of Rs 1.5 crore so far as CGST is concerned," Empowered Committee Chairman Abdul Rahim Rather told reporters.
The contentious issue of dual control of traders - by both the Union government and state governments - in GST structure, would be that taxpayers with annual turnover of over Rs 1.5 crore would be taxed by the Centre, which will later disburse to states their share.
Those with turnover below Rs 1.5 crore would pay their taxes to states, which would subsequently pass on to the Centre its share.
As per the recommendation, GST would not be imposed on businesses with annual turnover of less than Rs 10 lakh. Currently the threshold for Value-Added Tax (VAT), it is Rs 10 lakh in most states.
"So far as threshold limit is concerned, it was decided that it should be Rs 10 lakh in respect of general category of states and Rs 5 lakh for special category and NE states," Rather said.
As regards the items exempted from the purview of GST, the Committee suggested that they should be mentioned in the Constitutional Amendment Bill. States have already told the Centre that items like petroleum and tobacco would be kept out of GST.
On compensation for phasing out of Central Sales tax (CST), Rather said that Rs 13,000 crore has been pending as on March 2010.
Gujarat Finance Minister Saurabhbhai Patel urged the Empowered Committee to take a balanced view in the proposed dual control by both state and Central authorities, along with sustainability of states revenues and ease in compliance for small traders while rolling out the GST.
