New Delhi, Aug. 20: The states have demanded that the constitutional amendment bill on the goods and service tax (GST) must include a provision on compensating them for losses incurred on shifting to the new tax regime.
At their meeting today, the empowered committee of state finance ministers also wanted the threshold for imposing GST to be lowered to Rs 10 lakh from the proposed Rs 25 lakh along with greater authority in collecting the tax from businesses with an annual turnover of Rs 1.5 crore.
The Centre has not been keen to bring in these provisions till now.
The empowered committee said states should be given legal powers to collect tax from businesses with an annual turnover of up to Rs 1.5 crore.
“About dual control, the empowered committee decided to recommend that for a threshold of Rs 1.5 crore, the Centre will not interfere in assessment, audit and other matters. It will be left exclusively to the states. But officials from the Centre insisted that only administrative control would be given to the states.
“The states insisted that legal powers should also be given to the states for up to Rs 1.5 crore so far as CGST is concerned,” empowered committee chairman Abdul Rahim Rather told reporters.
The Centre has been proposing that businesses with an annual turnover of over Rs 1.5 crore would be taxed by the Centre, which will later disburse to states their share.
Those with a turnover below Rs 1.5 crore would pay their taxes to states, which would pass on to the Centre its share.
States want GST to be levied on businesses with a revenue of Rs 10 lakh as is done for value-added tax (VAT) in most states. However, traders as well as taxation experts feel this will lead to more harassment and little by way of collection.
“So far as the threshold is concerned, it was decided that it should be Rs 10 lakh in respect of general category of states and Rs 5 lakh for special category and Northeast states,” Rather said.
On the items exempted from GST, the committee suggested they should be mentioned in the Constitutional Amendment Bill. States have already told the Centre that items such as petroleum and tobacco should be kept out of GST.
Rather said the empowered committee wanted some Rs 13,000 crore to be transferred to the states as compensation from reduction in CST (central sales tax) and pointed out that this has been pending for two years.