The proposed goods and services tax (GST) faced fresh challenges as State Finance Ministers pressed for lowering the threshold limit to Rs 10 lakh for imposing Goods and Service tax (GST) on entities, lower than Rs 25 lakh proposed earlier. The Empowered Committee of State Finance Ministers that met on August 20 has also asked the Central Government to specify GST compensation structure for five years in the Constitutional Amendment Bill.
Further, state FMs had also proposed to keep products such as petroleum, tobacco and alcohol out of GST ambit and demanded that the exemption list be included in the Constitutional Amendment Bill. On tax collections, the ministers have demanded that legal powers should be given to the states rather than administrative powers to collect tax from businesses with an annual turnover of up to Rs 1.5 crore. Under the dual control of traders in GST structure, taxpayers with annual turnover of over Rs 1.5 crore would be taxed by the Centre, which will later disburse to the share of the states. Those entities with turnover below Rs 1.5 crore would pay their taxes to states, which would subsequently pass on to the share of the Centre.
The government is likely to bring new GST Bill in the Winter session of Parliament. GST, the proposed new indirect tax regime and one of the biggest taxation reforms in India will replace existing state and federal levies such as excise duty, service tax and value-added tax (VAT) and will integrate State economies and boost overall growth. Under GST, the taxation burden will be divided equitably between manufacturing and services, through a lower tax rate by increasing the tax base and minimizing exemptions. The industry is awaiting its introduction, as GST would remove the cascading effect, boost revenues and aid economic growth.