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Business News/ Politics / Policy/  GST bill: Has NDA government yielded too much ground to states?
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GST bill: Has NDA government yielded too much ground to states?

Not all concessions given by the Centre may be good for achieving a GST which benefits the economy as well as lowers the cost for businesses

The Centre agreed to allow state tax officials to administer GST for small traders whose revenue is less than Rs1.5 crore. West Bengal finance minister Amit Mitra termed it as a major victory for states. Photo: Ramesh Pathania/MintPremium
The Centre agreed to allow state tax officials to administer GST for small traders whose revenue is less than Rs1.5 crore. West Bengal finance minister Amit Mitra termed it as a major victory for states. Photo: Ramesh Pathania/Mint

Kolkata: The National Democratic Alliance (NDA) is wooing states by giving concessions.

In a bid to arrive at a consensus on the goods and services tax (GST), the Centre has yielded on many demands by states, including lowering the revenue threshold level beyond which traders will be exempt from GST and giving up administrative powers over traders with a revenue of less than 1.5 crore.

In a meeting of empowered committee of state finance ministers on Tuesday, the Centre agreed to allow state tax officials to administer GST for small traders whose revenue is less than 1.5 crore. This ceding of control to states followed a demand from states to protect small businesses from dual control.

West Bengal finance minister Amit Mitra, who is also the chairman of the empowered committee of state finance ministers, termed it a major victory for states.

Further, in the draft GST law released on Tuesday, the government proposed that the revenue threshold of traders who will come under GST should be 10 lakh for all states with the exception of North Eastern states where the threshold is lower at 5 lakh. This is significantly less than the 25 lakh that the Centre was proposing and the industry was favouring.

Looking to address the concerns of states over loss of revenue from e-commerce transactions, the Centre has also incorporated a provision for tax collection at source (TCS) for e-commerce companies. This means that any payment made to a supplier by an e-commerce company will be subject to TCS.

However, not all of the concessions given by the Centre may be good in the overall scheme of achieving a near-perfect GST which benefits the economy as well as lowers the cost for businesses and improves the ease of doing business.

Analysts point out that lowering the threshold level to as low as 10 lakh will increase revenue collection costs drastically for the governments.

Sachin Menon, partner and head of indirect tax at KPMG India, said the threshold of 10 lakh is too low.

“The provisions of the model GST law that prescribes a GST threshold limit which is as low as 10 lakh ( 5 lakh for north east), may be a zero sum game as the administrative cost of compliance on both ends would equal the tax collected," he said, adding that the empowered committee should consider a higher threshold.

“The current threshold for excise is 1.5 crore and hence many more businesses would come under the Central tax net. The industry was hoping for a higher threshold of at least 25 lakh," said Pratik Jain, leader indirect tax at PwC India.

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Published: 15 Jun 2016, 11:50 AM IST
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