Press Reports indicate that the first meeting of the GST Council took place on a very positive note and decisions were taken on consensus without requirement of voting. Reports also indicate that decisions have been taken with reference to threshold limits and jurisdiction.
GST Threshold Limit
A GST threshold of Rs.20 lakhs and a lower threshold of Rs.10 lakhs for Northeastern States would bring in a lot of cheer for the following reasons:-
(i) Small assessees would be kept out of the GST net.
(ii) A number of service providers such as landlords, resident welfare associations, clubs, professionals, consultants, labour contractors, caterers, and so many other service providers who are currently discharging service tax on account of the smaller threshold of Rs.10 lakhs, would go out of the tax net.
(iii) A number of small traders operating in the VAT regime who were paying VAT on account of a lower threshold limit in the existing VAT laws would be relieved.
(iv) The tax administration would also gain since administering a huge volume of small assessees would only drain resources and time.
Jurisdiction
Press reports indicate that State Authorities will have jurisdiction over assessees with an annual turnover of less than Rs.1.5 crores; Assessees with turnover above Rs.1.5 crores would be subject to cross examination either by officers by Centre or State to avoid dual control. Assessment of existing service tax assessees currently assessed by the Centre would remain with the Centre and new assessees would be divided between Centre and State. While a plain reading of these reports indicates a very simple system in reality it is likely to unleash complexities which may be difficult to resolve.
(i) An existing service tax assessee who provides services may also be selling goods an
The question is whether he is an existing service tax assessee or existing VAT assessee?
(ii) The term ‘turnover’ has been subject matter of litigation, interpretation, definitions both under direct and indirect tax laws. It remains to be seen as to how decisions of the Council would get documented and implemented. The question is whether there would be provisions in the State law prohibiting any assessment of existing service providers by the State Authorities?
(iii) Tax Administration and Tax Assessment is an ocean by itself. When CBEC circulars are not followed and Circulars by Commissioners at the State level are not implemented, the enforcement of these decisions is very critical.
(iv) Who would be a new assessee? At what point of time would a person be considered as a new assessee? At what point of time a decision would be taken on assessees to be divided between Centre and States. To illustrate, if a new construction service provider is identified to be in the State List, it would mean that the State Authorities will have to implement CGST as well as SGST for the said assessees. There is no guarantee that the CGST law and the SGST law would remain the same since power to make law for both Parliament and States under Article 246A is independent and supreme. In such a scenario, what would be the fate of assessment?
(v) This concept of ‘either or’ would work in bank deposits but not for assessments. When the turnover is above Rs.1.5 crores while dual control is considered as not the best solution, the concept of ‘either or’ would also not work. A trader with a turnover of Rs.3 crores would be currently assessed by the State VAT Authorities and it is but logical that the State tax authorities would be the first to reach out to the said assessee right from the stage of GSTN migration. Does it mean that the Centre would have no role or say in assessment? The ideal solution is to explore an LTU concept where beyond certain thresholds there would be a common office in every State / city which would comprise of Central Government and State Government officials for implementing both CGST and SGST.
Cess
There are so many levies in the name of cess through various laws such as Rubber Act; Mines Labour Welfare Cess Act; Mines Labour Welfare Fund Act; Textile Committees Act; Industrial Development Regulation Act; Sugar Cess Act; Jute Manufacturers Cess Act; Tea Act; Tobacco Cess Act; Cement Cess Rules; apart from cess that is levied through the Finance Act. The good news is that all cesses would be subsumed in GST. It is hoped that this decision is fully implemented and there is no fresh cess or existing cess on GST.
Compensation
In so far as compensation is concerned, granting compensation on regular intervals would ensure that the State’s revenues are not affected and they are able to fulfill their committed programs. This is also likely to increase the confidence of the States and bridge the trust deficit since the CST compensation in the past has been a matter of concern for the States.
Revenue projection
The decision to keep the financial year as 2015-2016 as the base year for making revenue projection is an interesting one since data would be authentic and not merely estimates and would serve as a good tool for all calculations.
d discharging VAT.
