Threshold limit for levying GST reduced to Rs 10 lakhs

Dated 21st August, 2014

The finance ministers of different states on Wednesday pressed for lowering the threshold limit to `10 lakh for imposing Goods and Service Tax (GST) on entities, lower than `25 lakh proposed earlier. They also asked the Centre to specify GST compensation structure for five years in the Constitutional Amendment Bill.

However, the Empowered Committee on State Finance Ministers that met on Wednesday to deliberate on various issues regarding GST rollout, said that it was yet to hear the Centre’s response on the proposed new tax regime.

“So far as shape of GST is concerned, we have made recommendation to the Central government after the last meeting. The Government has not responded yet,” Empowered Committee Chairman Abdul Rahim Rather said after the meeting.

In its last meeting earlier in July, the government had said that implementation of the much anticipated comprehensive tax will be “sooner than later” and it was engaging with the states with an open mind on the subject. The state FMs had proposed to keep products such as petroleum, tobacco and alcohol out of GST ambit and had demanded that the exemption list be included in the Constitutional Amendment Bill.

As regards the compensation structure, the states have demanded that a five-year compensation mechanism be given by the Centre and the same should be made in the Constitutional Amendment Bill.

“GST compensation structure should be part of Constitutional Amendment Bill,” Rather said, adding a five-year compensation structure be included in the Bill.

Regarding dual control, the states demanded legal powers, and not only administrative powers, to collect tax from businesses with an annual turnover of up to `1.5 crore.

Under the dual control of traders by both the Centre and states — in GST structure, taxpayers with annual turnover of over `1.5 crore would be taxed by the Centre, which will later disburse the share of the states.

Those entities with turnover below `1.5 crore would pay their taxes to states, which would subsequently pass on to the share of the Centre.

The new GST Bill is that is expected to be introduced in the winter session of Parliament will subsume indirect taxes like excise duty and service tax at the central level and VAT on the states front, besides local levies.

Implementation of GST will lead to the removal of multi-layered taxation and abolition of other taxes such as octroi, central sales tax, state-level sales tax, entry tax, stamp duty, telecom licence fees, turnover tax, tax on consumption or sale of electricity, taxes on transportation of goods and services, etcetera, thus avoiding multiple layers of taxation that currently exist in India.

When implemented the country stands to gain $15 billion by way of revenue as it would promote exports, lead to employment generation and help in growth pick-up. It will divide the tax burden equitably between manufacturing and services.