4th GST council meeting


The 4th GST Council meeting ended without reaching any resolution on the dual control over assesses. This issue has been pending since the second GST council meeting. Council has explored two options:

  • Horizontal Division
  • Vertical Division

Right now there is tug of war between centre and state as to who will get how much control over the assessees of VAT, excise and service tax. This is an administrative issue.

Under vertical division, assessees will be distributed among state and centre in a particular ratio for 3 years for all purposes including audit. Ratio could be 50:50 or 40:60. In this approach 50%/60% of the tax payers below threshold of 1.5 crore would be handed over to centre. It can be changed every 3 years.

The horizontal division would be based on the turnover of the assesses. If the turnover is below Rs. 1.5 crore then state will have exclusive control over that taxpayer, and for taxpayers above Rs. 1.5 crore, either State or Centre will assess. (Now this is a cross empowerment case). But there is disadvantage under horizontal division. According to certain sources, 93% of the service tax payers and 85% of the VAT payers have turnover below 1.5 crore.

Finance Minister Arun Jaitley said that they will have an informal meeting of all finance ministers of the states on 20th November where they will try to talk and find out some political solution to this problem. He said that they will not take any decision in hurry and everything should be done systematically.