New GST circular adds to confusion

The broad rules on splitting assessees among Centre and state tax officers for administering them could add to further confusion under the goods and services tax (GST) regime that kicked in from July 1. The circular issued by the GST Council secretariat on the principles of dividing taxpayers among authorities leaves certain grey areas while making their distribution unequal.

Experts said this may create complications as offices of GST have been created on geographical basis and random picking may lead to unequal distribution of assessees with states having fewer control centres.

“The distribution would certainly be skewed but that has been more or less clear from the beginning,” said Bipin Sapra, partner (indirect tax) at consultancy firm EY. He added the circular on dividing taxpayers does not specify the time for administering an assessee and this is an area which needs to be cleared to address confusion among taxpayers. In line with the decisions taken by the GST Council on January 16 this year and further on September 9, the circular has said that 90 per cent of the assessees with an annual turnover below Rs 1.5 crore will be audited by state tax authorities while the remaining 10 per cent will be under central tax administration.
Those assessees having annual turnover of more than Rs 1.5 crore would be divided equally in the ratio of 50 per cent each for central and state tax administrations. The division of taxpayers in each state shall be done by computer at the state level based on stratified random sampling and could also take into account the geographical location and type of taxpayers.

“I see another complication as to how the mechanism would be given effect to. If one authority, let's say central tax officers, is assessing a dealer then after how much time it would go to the state authority. Now, suppose that state authorities take certain position on some transactions but in the next year it is assessed by the Centre and a different position is taken. Because two different authorities are assessing the same person for two different years and for the same transaction, they can co­me out with different vie­ws. Now how will these ki­nds of possibilities be reconciled?” asked Amit Bh­a­g­at, tax partner at PwC.

Bigger corporate firms, which have multiple registrations for different states, are also concerned about different tax authorities assessing their returns. Before the rollout of GST, the issue of administrative control over dealers was one of the stickiest issues. It took several meetings between Centre and states before finalising the principle for splitting the taxpayers between the two tax authorities. Even then there were concerns raised over dual administrative control in the new regime but Union finance minister Arun Jaitley had said that each taxpayer would be assessed by only one authority.

Ever since its implementation, GST has been hit by technical glitches and procedural issues forcing the government to extend return filing deadlines. Tax rates have been revised multiple times leaving industry nervous. In the last GST Council meeting, rates for as many as 30 items were changed including a hike in compensation cess levied on bigger cars and SUVs.

Nirbhay Kumar