GST: Who will assess companies?

States pitch for the Rs 1.5-cr administrative threshold limit to be included in GST Act; FM Arun Jaitley says discussions are at an advanced stage

The goods and services tax (GST) still faces many challenges and one that stands out is with the issue of administrative control over assessing companies, yet to be ironed out between the Centre and the states.

The states have unanimously opposed the Centre's proposal of dual control and pitched for sole administrative powers to carry out assessment, scrutiny and enforcement for entities up to an annual turnover of Rs 1.5 crore. The Centre has, instead, worked out an administrative framework without a threshold, ensuring a taxpayer will have to deal with only one authority for all taxes - central GST, state GST and integrated GST (I-GST).

Finance Minister Arun Jaitley had, in his reply to Trinamool Congress member of Parliament Derek O'Brien in the Rajya Sabha, said the matter was under discussion and would be resolved by November. "Discussions are at an advanced stage and we will find out a solution for that," said Jaitley.

O'Brien had asked, "The issue of cap of Rs 1.5 crore for dual control is also important. Clarification is required in that regard."

The states have strongly pitched for the Rs 1.5-crore administrative threshold limit to be included in the GST Act. The states want exclusive administrative power up to the Rs 1.5-crore threshold. The states want the Centre and states to have powers to assess anything beyond that.

The Centre had, instead, proposed two options to iron out the administrative differences under the unified indirect tax regime.

It had recommended doing away with the threshold altogether. If the states get exclusive control up to Rs 1.5 crore, it had argued, the Centre should get exclusive control over anything above that limit.

To simplify the assessment and adjudication for taxpayers, the Centre proposed "cross-power" model, without a threshold. Under this, the Centre would initiate action and carry out scrutiny and adjudicate in case it detects a state GST case and vice versa.

Read our full coverage on the GST Bill and its impact

Amit Mitra, West Bengal finance minister and chairman of the empowered committee of state finance ministers, had said, after a recent meeting: "Union finance minister heard the consensus very clearly that up to Rs 1.5 crore, small businesses such as a beauty parlour run by a woman or some small businesses of shops should not suffer from dual control of both state and Centre authorities."

Jaitley did not give any clear assurance that the Centre's insistence on dual control below the threshold of Rs 1.5 crore would be dropped.

However, there was confidence among states that the Centre would have to cede ground on the issue, as the states were opposing the matter vehemently.
IMPACT & SOLUTION: SECTORAL SNAPSHOT

CONSUMER DURABLES AND FMCG

Impact of GST

• Excise duty, VAT/ CST, octroi, entry tax to be subsumed under GST
   
• Cross-utilisation of credits on goods and services in the entire supply chain

What companies should do

• Evaluate pricing
   
• Supply chain restructuring

TELECOM

Impact of GST

• Decentralised compliance
   
• Multi-state circles a challenge

What companies should do

• Evaluate pricing of products
   
• Evaluate processes

ALCOHOL

Impact of GST

• Not covered under GST
   
• GST in supply chain would be a cost
   
• Quantum of state tax to be ascertained

What companies should do

• Should represent for inclusion in GST
  

 

Evaluate pricing for impact due to GST blockage on input side

BANKING

What companies should do

• Evaluate pricing of services
   
• Monitor input tax credit on account of increase in base-optimise costs

AUTOMOBILE

Impact of GST

• Excise duty, VAT/ CST, Octroi, entry tax to be subsumed into GST
   
• Cross-utilisation of credits on goods and services

What companies should do

• Evaluate pricing
   
• Supply chain restructuring

PHARMACEUTICALS

Impact of GST

• Cross-utilisation of credits on goods and services

What companies should do

• Evaluate continuation of exemptions and pricing

MEDIA

Impact of GST

• Cross-utilisation of credits on goods and services

What companies should do

• Evaluate pricing
   
• Monitor entertainment tax levied by local bodies

E-COMMERCE

Impact of GST

• Tax collected at source - increase in compliance cost
   
• Increase in rate
   
• Complexity due to place of supply rules

What companies should do

• Evaluate pricing
   
• Supply chain and reverse logistics restructuring

REAL ESTATE

Impact of GST

• Cross-utilisation of credits on goods and services available under GST

What companies should do

• Evaluate pricing
   
• Monitor input tax credit on account of increase in base-optimise costs

LOGISTICS

Impact of GST

• Redesigning of supply chain by other sectors likely to favour the logistics sector

What companies should do

• Tap business opportunities
  

 

Supply chain restructuring

Source: EY