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Q. Consensus in GST Council: Comment on recent consensus on administrative control over tax payers between centre and states.
Jan 18, 2017 Related to : GS Paper 2 and 3

Ans :

Introduction-

Since passage Goods and Service Tax (GST) bill, administrative control over tax payers has become contentious issue between centre and states. Recently the GST council in its 9th meeting has arrived at a consensus on above contentious issue in the new indirect tax regime, thus paving the way for GST to be introduced this year.

Consensus points-

  • The entire taxation base will be shared between the assessment machinery of the Centre and the States.
  • As per the formula for dual control of assesses, 90% of those with a GST turnover of Rs. 1.5 crore or less will be assessed for the purposes of scrutiny and audit by the States, and 10% by the administrative machinery of the Centre.
  • Those above a turnover of Rs. 1.5 crore would be assessed in the ratio of 50:50 between the Centre and the States.
  • The power to levy and collect the Interstate GST (IGST) will lie with the Central government, a special provision would cross-empower the States in the same ratio agreed upon for tax assessees.
  • The Council will now meet in February and approve the legislations that need to be cleared by Parliament and it is expected that those would be passed and ratified during the Budget session.

Analysis-

  • Various contentious issues were holding up the introduction of the new indirect tax regime. The GST council’s recent breakthrough of contentious issues has paved the way for introduction of GST this year.
  • By giving up on its formula to split such control by assuming the authority to levy GST on all services entities and manufacturing firms, the Central government has shown a willingness to meet the States more than halfway.
  • The compromise formula gives States, many of which had claimed at recent GST Council meetings revenue losses following the demonetisation of currency notes, the leeway to claim that they have struck a better deal with the Centre on a reform that is now inevitable.
  • In its next meeting GST council will address the some other concerns and approve the legislations that need to be cleared by Parliament. With this consensus central government is eying to rollout GST on more realistic date July 1. 

Conclusion-

The recent consensus on administrative control over taxpayers between centre and states is welcome move. Central government have more maturity and interest and yielded demand of states, which is good move for cooperative federalism. Now GST is expected to roll out from July 1 and it will bring paradigm shift in in-direct regime.


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