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GST: Centre, states fail to resolve dual control issue

The Centre and states on Sunday failed to resolve the contentious dual control issue as to which set of taxpayer is assessed by whom, making the November 25 meeting crucial if the government is to meet the April 1 deadline for the roll out of the goods and services tax (GST). Officials from Centre and states will meet on Monday to reach a solution ahead of the meeting of the GST Council on November 25. The informal meeting of state finance ministers and Union Finance Minister Arun Jaitley was called on Sunday to find a political solution to the deadlock on sharing of administrative control under GST so that a tax payer is not assessed by both the Centre and the relevant state, the so-called issue of dual control. “The meeting has remained incomplete. Discussions will continue on November 25,” Jaitley told reporters after the three-hour long meeting. The states are insisting on having oversight over all assesses, goods and services, who have turnover of up to Rs 1.5 crore, or a horizontal division. The GST will subsume a number of indirect taxes levied by states and Centre, which will mean tax administration responsibility will have to be shared but the division has been contentious. The council needs to quickly decide on the issue on November 25 so that it can also approve the model GST laws that need to be introduced and passed in the ongoing winter session of parliament for the government to meet the April 1, 2017 deadline to roll out this reform. The November 24 meeting of the council has been called off. The earlier solution was that assesses with turnover of up to Rs 1.5 crore in the case of goods will be assessed by states and above that by the Centre. In case of services, all were to be assessed by the Centre. The formula collapsed as states wanted oversight of the services as well and there were doubts that it may not be able to split goods and services in some cases, making the implementation of the Rs 1.5-crore threshold difficult. Kerala, Uttarakhand, West Bengal, Uttar Pradesh and Tamil Nadu want states to have jurisdiction over businesses of turnover of less than Rs 1.5 crore for both goods and services, reasoning that the state tax administration has better understanding of small taxpayers. “Centre is agreeable on goods, but is not yielding on services. States are looking at their interest to safeguard their revenue. Centre will have to yield to states to get the CGST and IGST bills passed. A middle ground on the issue has to be worked out politically,” said Uttarakhand Finance Minister Indira Hridayesh. Kerala Finance Minister Thomas Issac said there is a stalemate on the issue and his state is not ready to compromise. The Centre is keen on a vertical split wherein certain percentage of taxpayers are under central administration and the balance under the states. The percentage could also be the sticking point in this case. The Centre is willing to give a bigger share to states to settle the issue. The Centre and states have agreed to a four-slab GST of 5%, 12%, 18% and 28%. The Centre and the relevant state will split these taxes evenly.

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