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By Siri Bulusu
The Indian government has deferred implementation of the goods and services tax to July 1 after resolving the hotly debated issue of dual control over taxpayers between the country’s central and federal tax authorities.
The issue of administrative control over taxpayers resulted in the continued postponement of the pan-India tax, which was originally set for an April 1 implementation date.
“The decision on deferment of GST to July is pragmatic,” Rajeev Dimri, leader of Indirect Tax at BMR & Associates LLP, said in a statement Jan 16.
“A well thought through implementation post meticulous discussion on the draft legislation is far more desirable than a premature rushed through roll out.”
Dimri said the postponement of the implementation date was necessary for the GST Council to approve the GST draft laws.
“All services, traders and manufacturers will now fall under the concurrent jurisdiction of center and state,” Dimri told Bloomberg BNA Jan. 17, an undesirable situation for the industry due to concerns over differing perspective from “two masters.”
Under the newly announced administrative control plan, taxpayers who fall above the 15 million rupee ($220,727.25) threshold will be assessed 50-50 between the federal and state authorities.
Administrative control over large companies was the primary debate between the center and state governments. According to Dimri, the 15 million rupee threshold is a carry-over from existing excise tax law—a benchmark the states used to draw a line between small and big companies.
“Small companies already don’t pay excise tax, they only pay VAT, so the states wanted to keep control over those taxpayers,” Dimri said.
Ninety percent of taxpayers who fall below a threshold of 15 million rupees will be assessed by state tax authorities with the remaining 10 percent being assessed by the federal tax authorities.
States will also collect tax on economic activity within 12 nautical miles of territorial waters.
The GST Council will meet again Feb. 18 to finalize the GST draft laws, before it is presented before parliament and state legislatures for approval.
The three GST bills awaiting approval by parliament are:
To contact the reporter on this story: Siri Bulusu in New Delhi at firstname.lastname@example.org
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