The Centre and the states failed on Friday to agree on the crucial issue of “dual control” to divide the administrative, auditing and assessing powers between the two governments under the proposed nation-wide goods and services tax (GST).
“One of the objects of integrating taxes is that each assessee will have to face only one assessing officer,” finance minister Arun Jaitley told reporters after a meeting of the GST Council.
“This is an administrative issue that functionally you can’t have multiple assessing authorities,” he said. “There should be clear guidelines on who should assess whom”.
There will be an informal meeting of the ministers on November 20, primarily aimed at hammering out political consensus. The GST Council, headed by Jaitley, will meet on November 24-25 after the informal meeting.
“We will try and thrash out a solution on November 20. This has to be a well thought-out solution,” Jaitley said.
There was a view that assessees should be divided horizontally with Rs 1.5 crore be the cut-off base.
Under this model, states were to assess businesses with an annual turnover Rs 1.5 crore, while both the Centre and states were to do so for businesses having higher turnover.
The other proposal was to divide the assessee-base vertically without a threshold.
“The pros and cons of both were discussed today,” Jaitley said. “The consequences of these are unforeseen. We have completed a substantial part of the discussion”.
The Council’s next meeting on November 9-10 has been cancelled.
Central and state government officers will prepare the drafts of four supplementary bills dealing with CGST, SGST, IGST and the compensation law.
Under the new system, the states and the Centre will collect identical rates of taxes on goods and services. For instance, if 18 percent is the GST rate on a good across the country, the states and the Centre will get 9 percent each called the CGST and SGST rates.
The Centre will also levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supply of goods and services.
The IGST mechanism has been designed to ensure seamless flow of input tax credit from one state to another.
“Officers will finalize the drafts by the November 15 this month. States will be given one week’s time to suggest any changes,” Jaitley said.
On Thursday, the Council agreed on a four-slab structure –5, 12, 18 and 28 percent—along with a cess on luxury and `sin’ goods such as tobacco.