The contentious issue of dual control under the proposed Goods and Services Tax (GST) has been 'resolved' for now with the Centre and the states agreeing upon a rather complicated arrangement to share control over tax assessees. The rollout date has now been pushed back by at least three months to July 1 from the initial April 1 deadline.
However, the compromise formula reached to break the deadlock between the two will only complicate the new indirect tax regime even further, given that there is no clarity on procedural issues. At the same time, it assured that no entity will be assessed by more than one authority.
According to the new arrangement, 90 per cent of tax assessees with an annual turnover of Rs 1.5 crore or less, will be assessed by states and the rest by the Centre. For those with turnover of over Rs 1.5 crore, the states and the Centre will share it equally. Tax experts believe that if states are allowed to audit assessees falling under the central and integrated GST, complications will arise. Apart from this there are many issues that have not been addressed and would only be known once the government comes out with the final law.
Says Bipin Sapra, Indirect Tax Partner, E&Y India: "The government has only given a high-level understanding of the issue. There would be many nitty-gritty, which even the government is sorting out as we speak." According to Sapra, under the GST regime, there are three things that a government body can control - audit, (prevention of) anti-evasion and adjudication. "As far as the new arrangement is concerned it only addresses the audit part. It is not clear in case of a dispute between the controlling authority and the assessee, who would issue the demand note and who would adjudicate the case," he adds.
Then there are other issues. For instance, if an entity with a turnover of less than Rs 1.5 crore in one year, posts turnover of Rs 1.5 crore in the following financial year, who would be the new authority to take over the assessment? And, how will existing investigations, if any, against the entity be addressed, and by whom? "There are a lot of procedural issues, and if these issues are not addressed properly, they would lead to litigations," says Rajat Mohan, Director, Indirect Taxation, Nangia & Co., a chartered accountancy firm.
The GST law was already a very complex law compared to the way it was initially conceived. The dual control issue, has only added to the complexities. Hope by the time the GST roll-out happens, it does not end up being a messy law that would only complicate the lives of entrepreneurs and businesses.