With the Centre and states agreeing to keep traders with turnover of up to Rs 20 lakh out of the GST ambit, interest of small traders has been protected, West Bengal Finance Minister Amit Mitra said today.
Hailing the decisions reached at the first meeting of GST Council, he said more than half of the 2.65 lakh businesses in West Bengal will not be paying the new indirect tax, set to be implemented from April 1.
“We were able to protect the interest of small traders, small manufacturers and laying out of initial path of GST,” he told reporters here.
The two-day meeting of the GST Council passed rules which will be the first steps towards the Goods and Services Tax (GST), he said.
The meeting decided on a Rs 20 lakh threshold of annual turnover for levying GST on traders and businesses and Rs 10 lakh for North Eastern and hilly states.
Stating that the VAT limit currently varies from state to state, Mitra said that for West Bengal the limit is currently at Rs 10 lakh, for Uttar Pradesh it is at Rs 5 lakh and it is only Rs 1 lakh in North Eastern states.
There is wide variation among states on current VAT threshold. “GST Council agreed at Rs 20 lakh threshold which means any dealer who has turnover of less than Rs 20 lakh will not be part of tax net. This gives huge relief to small businesses of India and West Bengal,” he said.
In West Bengal, a total of 1.38 lakh business will not be paying tax out of total pool of 2.65 lakh, he said.
He said the administrative cost of collecting tax is higher than the tax received. “This is a big relief.”
On dual control, he said businesses with turnover of Rs 1.5 crore annually continue to be under state control and beyond that will be dual control.
“Below Rs 1.5 crore you should not have control. (They) should not face audit by both Centre and States. We didn’t want Inspector Raj,” he said.
At the end of two day discussion, Union Finance Minister Arun Jaitley agreed on Empowered Committee suggestion that any small manufacturer or trader would not be included in the dual control mechanism.
“Only states would be involved in working with taxpayers like small traders and shop keepers,” he said adding above Rs 1.5 crore turnover businesses would be governed by dual control as Centre already levies excise duty.
“Small manufacturers will not face dual control in GST,” he said.
On service tax, Mitra said only the Centre levies the tax currently and so it was felt that this levy should go to states only for the initial period. “Once state officials are trained, it wold go to states.”
He added: “We will take care of all small manufacturers. We have protected core group with whom we work today. Above 1.5 crore turnover there is already dual control, we will logically define a way to have mutually acceptable method for control.”
On the deliberations at the Council meeting, Mitra said rules for GST have been set in motion and compensation to states also been defined.
“Threshold has given a huge relief to small business,” he said.
For compensating states for any loss of revenue by way of implementing GST, he said three alternatives were discussed.
A state can be compensated if the revenue under GST falls short of the average tax earnings in best three years out of past five years.
Secondly, of the five years, two outliers are left out and average is taken. If the revenue under GST is short of this, then states gets compensated.
Thirdly, a base year can be fixed and a particular growth rate decided for all states. If the revenue falls short of that, then the state gets compensated.
Base year for calculating compensation has been agreed as 2015-16 and average of five years will be taken, he said, adding if for some reasons the base year becomes 2016-17, then the average would be taken for 6 years.
“These three ideas will be discussed by the officers and GST council will take a call,” he said. “States have prevailed in dual control. We are charging VAT and sales tax and we continue with that. I am very pleased that Union government has accepted Rs 1.5 crore. This shows cooperative federalism.”