Centre-state stalemate over GST jurisdiction continues


  1. Stalemate between the Centre and states over administrative control under proposed goods and services tax (GST) regime continued with an informal meet called by Finance Minister Arun Jaitley failing to break the deadlock.
  2. It failed to arrive at a common ground on how Centre and states will control assessees under the new regime that will subsume an array of taxes like excise duty and service tax as well as VAT.
  3. States are unrelenting on their position of being given right to control all assessees with up to Rs 1.5 crore annual turnover.
  4. States like West Bengal, Kerala, Uttarakhand, Uttar Pradesh and Tamil Nadu have insisted on exclusive control over small taxpayers, who earn less than Rs 1.5 crore in annual revenue, for both goods and services.
  5. Centre is agreeable on goods, but is not yielding on services. States are looking at their interest to safeguard their revenue. Centre will have to yield to states to get the CGST and IGST bills passed.
  6. The GST Council has arrived at two options for jurisdiction — horizontal division and vertical division.
  7.  ‘Horizontal Division’ would mean taxpayers would be divided both for administrative and audit purposes based on a cut off turnover. Those with a turnover over Rs 1.5 crore would be administered both by the Centre and states, while those with below Rs 1.5 crore would be administered solely by the state.
  8.  ‘Vertical Division’, based on ratios, assigns taxpayers to a tax administration, Centre or state, for a period of 3 years for all purposes including audit. Taxpayers could be divided in a ratio which would balance the interest of the Centre and the states, both with respect to revenue and spread of numbers.
  9.  Centre, on the other hand is unagreeable to the states’ demand of exclusive control over small entities which earn less than Rs 1.5 crore in annual revenue, as it wants single registration mechanism for ease to service taxpayers.
  10.  Instead of horizontally splitting the taxpayers, it has proposed to divide entire taxpayer base vertically.
  11.  As a compromise, it is willing to give states administrative power over 2/3rd of taxpayer base, with service tax continuing to be administered by Centre.
  12. At present, the estimated total indirect taxpayer base, including value-added tax, service tax and excise, is around 10 million, of which around 0.4 million are common to the Centre and the states.