With a crucial informal meeting of Union finance minister Arun Jaitley with state finance ministers on GST slated for Sunday, several states including Kerala, West Bengal, Bihar, Odisha and Delhi are likely to press hard to get control over businesses with turnover up to Rs 1.5 crore.
“Kerala, Bengal, Tamil Nadu, Bihar, Delhi, Odisha… majority of states want a combination of vertical and horizontal (dual control structure). Below Rs 1.5 (crore turnover), states should tax, above Rs 1.5 crore, it can be vertical division,” Thomas Isaac, finance minister of Kerala, said.
Jaitley has called for a political meeting on November 20 to discuss two options — horizontal and vertical division of taxpayers. Division based on turnover and nature of business, which was considered in the GST Council meeting on September 22 and 23, remained inconclusive. Under this option, it was proposed that taxpayers dealing in goods below the turnover of R1.5 crore shall be dealt only by states and those with turnover above Rs 1.5 crore, by both states and the Centre. Also, the proposal was that to begin with, service tax would be administered by the Centre alone as the state officials needed training in this field.
However, it was later recognised that this arrangement causes a divide between goods and services and also created jurisdictional problems for those suppliers who had a substantial mix of supply of both goods and services. Also, with fresh data, it came to the states’ notice that the number of service tax assessees over 30 lakh, compared with 11 lakh flagged by the Centre.
The next meeting of the GST Council headed by Jaitley is scheduled for November 24-25. The Centre prefers to have in place a vertical division. It feels that horizontal division would be lopsided as 93% of service tax assessees and 85% of VAT taxpayers have a turnover below Rs 1.5 crore.