In a major breakthrough, the Centre and states on Monday, 16th January, 2017 reached a consensus on sharing powers for control over tax payers under GST but the new indirect tax regime will now be rolled out from July 1 instead of previously planned April 1. The consensus was reached after the Centre agreed to the demand of states to go in for horizontal split with regard to tax payers based on annual turnover.
According to the decision reached at the 9th meeting of all-powerful GST Council, states will have powers to assess and administer 90 per cent of the tax payers under Rs 1.5 crore annual turnover while the remaining would be controlled by the Centre. For tax payers with more than Rs 1.5 crore turnover, states and the Centre will control and administer them in 50:50 ratio. Thus, for turnover more than Rs.1.50 Crore threshold, the Centre and the States will share control equally.
Since there shall be very few percentage of regular assessment in the GST regime, the biggest gainer of the aforesaid arrangement of dual control shall be the assessees who will have only one authority to assess them in respect both the Central and the State laws of the dual GST.
On the second contentious issue of levying tax on the high seas, or within 12 nautical miles of the coast, the GST Council has decided to go along with the States, which wanted to retain the power to tax such economic activity. The GST Council however, maintained that constitutionally, the Centre has jurisdiction over territorial waters and as such suitable provisions shall be envisaged to allow the States to exercise powers in respect of transactions executed in the high seas.
The Finance Minister Sri Arun Jaitly clarified that the power to levy and collect Integrated-GST, a tax on inter-state movement of goods and services, will lie with Centre but by special provisions in law, states will also be cross-empowered.