 "Broad consensus among the states is necessary for GST framework: Tamil Nadu")
Speaking at the meeting of the Empowered Committee of State Finance/Taxation Ministers today, M C Sampath, Minister for Commercial Taxes and Registration, Government of Tamil Nadu, said that the committee recommendation on limited control by Central Government upto Rs 1.50 crore and simultaneous control beyond Rs 1.50 crore is acceptable. He stressed that the single return procedure is not limited to dealers with turnover up to Rs 1.50 crore.
He also said that fixing the threshold limit at Rs 25 lakh will leave out a large set of dealers outside the VAT chain leading to sales suppression and tax evasion. Tamil Nadu's stand is that the threshold must be fixed at Rs 10 lakh, said the State Minister, adding that the threshold for compounding should be continued to be at Rs 50 lakh with a floor rate of tax at one per cent since Tamil Nadu is anticipating loss due to introduction of GST.
"We would reiterate that the exempted list under State VAT may be taken as base for SGST and all these items may be continued as exempted items. In this connection, we would also urge that the States must be allowed to grant exemption on selected goods of Local importance without any restrictions and without reducing the compensation to the States," said Sampath.
He added, the destination-based IGST model predominantly favours consumer states more than producer states. Taking into consideration the revenue concerns of manufacturing states like Tamil Nadu, the minister suggested that the power to assess, revise and administer the Input Tax Credit transferred to other States on IGST transactions should be with the exporting state. This, in order to guard against bill trading activities, a proceeding passed by the tax authorities of the exporting state on allowing or disallowing ITC should not be disputed by the importing state. All class of dealers should be mandated to file monthly returns so that the gap in cross-verification of ITC claims could be avoided, different dates should be prescribed for filing of returns in respect of dealers having total annual turnover above Rs 1.5 crore and for those below Rs 1.5 crore.
He added, the revised draft Constitutional Amendment Bill on GST does not include enabling provisions for states to levy higher taxes on tobacco and tobacco products, similar to what has been permitted for the Centre, petroleum products such as petrol and diesel, which are currently outside the purview of state VAT in most states, are still proposed to be covered by GST under the draft Amendment Bill.
"A new provision has been made in the revised draft Amendment Bill which enables states to levy additional taxes over and above the GST on the sale of petroleum products. However, this system of a dual levy of GST and an additional tax is not acceptable to Tamil Nadu as a portion of the tax on petroleum products would still be eligible for input tax credit. Petroleum products should therefore be kept outside the purview of GST," said the State Minister, adding that the Amendment Bill should also provide for an independent compensation mechanism.