GST - The Dual Control Duel - Power Distribution - Vertical or Horizontal Split?
THE GST Council had to adjourn without a decision on the administrative control issue. GST is supposed to be a combined levy by the States and the Centre, but the moot question is who will collect it? If both start collecting it jointly, what will happen to the poor assessee? How to share the power? 'How to share the tax', is no more an issue.
The ideas floating around was GST on goods upto 1.5 crore will be with the States - any way the Centre was not collecting excise duty on this small scale sector; dual control above 1.5 crore; GST on services with Centre; Audit with the States. But then there was a statistical disaster. The Centre was campaigning that there are 11 lakh service tax assessees which suddenly swelled up to 31 lakh just before the GST Council meeting. The States which had surrendered the power to tax were not prepared to abdicate the right to collect. The question was whether there should be a vertical or horizontal split of the assessee base. Finally, it may be a combination of vertical and horizontal split.
The whole problem boils down to the deployment of the army of taxmen at the Centre and the States. Even now, there is no clear idea as to how many taxmen we have in the States and the Centre. One estimate is about 60,000 Central Taxmen and some three lakh State tax officials. So, the States are not prepared for a fifty-fifty vertical split. And the Council Meeting could not arrive at a consensus and has been adjourned without a decision. Finance Minister Arun Jaitley announced that an informal meeting of the Finance Ministers (without officials) will be held on 20th to find a political solution to this economic problem. Political Science to aid in economic engineering?