GST Council undecided over authority for tax assessment

Finance Minister Arun Jaitley says the Council had narrowed its options down to two, from five that were on the table.

November 04, 2016 06:08 pm | Updated November 17, 2021 06:20 am IST - New Delhi

The fourth round of meetings of the GST Council was inconclusive regarding the key issue of how to divide the authority to assess tax between the Centre and the States, although differences were narrowed down, Finance Minister Arun Jaitley said on Friday.

The next GST Council meeting has been postponed from November 9-10 to November 24-25, Mr. Jaitley said, adding that the Ministers will meet for an informal session on November 20 to discuss the tax assessment issue further.

The Finance Minister said that the preparation of the drafts of the Central GST, State GST, Inter-state GST, and Compensation Law will be completed by November 14-15. The draft laws will then be sent to the States, which will have one week to respond with any recommendations. “I am certainly more confident now than I was in August about passing the laws in the Winter Session of Parliament,” he said.

The Finance Minister added that the Council has narrowed down its options.

“One option is to divide assessees horizontally, where those with a turnover of less than Rs. 1.5 crore a year will be assessed by the States and those with more than that will be shared by the States and the Centre,” Mr. Jaitley told a press conference, after the two-day meeting.

The other option, he explained, was a vertical division of assessees. In this scenario, assessees will be divided into different strata — up to Rs. 5 crore, Rs. 5-10 crore, etc, for example. These strata will then be randomly divided vertically, according to a certain percentage.

“The issue is extremely contentious since all the consequences are yet to be worked out,” Mr. Jaitley added.

“There might even be a scenario where neighbouring shops are being assessed by different authorities. So we are not going to rush it.”

“The issue of dual control which has always been a nightmarish proposition to an assessee appears to be finally heading towards a resolution,” Prashant Deshpande, Partner, Deloitte Haskins & Sells LLP said. “Hopefully the division of the assessee base will consider the stakeholder interest above anything else.”

Of the two options, the Centre could be favouring the vertical division since the horizontal method favours the States disproportionately.

“The horizontal method is overwhelmingly skewed towards the States, since the huge majority of businesses are below Rs. 1.5 crore a year,” a senior official in the Revenue Department said.

“The efforts to pass the GST legislations in the Winter session are laudable,” Mr. Deshpande added.

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