State FMs agree on Rs 10 lakh threshold for GST

State Finance Ministers on Wednesday pressed for lowering the threshold limit to Rs 10 lakh for imposing Goods and Service tax (GST) on entities and asked the Centre to specify GST compensation structure for five years in the Constitutional Amendment Bill.

The Empowered Committee of state Finance Ministers, which met here to deliberate on various issues connected with GST rollout, regretted that it has yet to hear the response of Centre on the structure of the new tax regime proposed by it.

“So far as shape of GST is concerned, we have made recommendation to Central Government after the last meeting. Government has not responded yet,” Empowered Committee Chairman Abdul Rahim Rather said. 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 same should be made in the Constitutional Amendment Bill.

“GST compensation structure should be part of Constitutional Amendment Bill," Rather said, adding that a five year compensation structure be included in the Bill. As regards dual control, the states demanded legal powers, and not only administrative powers, to collect tax from businesses with an annual turnover of up to Rs 1.5 crore. “The states insisted that legal powers should also be given to the states to the extent of Rs 1.5 crore threshold so far as Central GST is concerned,” Rather said.

Under the dual control of traders - by both the Centre and states - in GST structure, taxpayers with annual turnover of over Rs 1.5 crore would be taxed by the Centre, which will later disburse to states their share. Those entities with turnover below Rs 1.5 crore would pay their taxes to states, which would subsequently pass on to the Centre its share.

A decision of the threshold limit has been pending for long and the GST panel at its meeting today has fixed it at rs 10 lakh, lower than Rs 25 lakh proposed earlier.