The Centre has pitched for a unified goods & services tax (GST) model as opposed to the position taken by the states. The empowered committee, which represents the states, had suggested separate goods and services taxes.
The Centre, which is giving finishing touches to its response to empowered committees report on GST, is understood to be in favour of the conventional model followed globally. The Centres response, expected to be finalised soon, is understood to have differed with the states on certain operational aspects of the GST such as threshold of taxation and inter-state services.
States want to have a pie in inter-state services such as telecom and financial services that form 80% of the total service tax revenue. However, the Centre feels the power to collect tax on inter-state services should lie with it to keep disputes at the minimum level and to prevent evasion.
Both the Centre and states also differ on the operational aspect of the threshold prescribed for tax collection by the Centre and states. As per the recommendations of the empowered committee, states should collect tax from assessees falling below Rs 1.5 crore and the Centre from those with a higher turnover. Sources pointed out this could create issues when a taxpayer registered with a state government on account of his lower turnover moves to Centre when he records higher turnover.
Besides, there seems to be an issue with companies present in multiple states but pay taxes in only one state. The Centre also wants to include purchase tax and other state levies in the proposed GST, which the states are opposing.
Meanwhile, the 13th Finance Commission, which is to look into the likely impact of the proposed implementation of GST, has also sought details of the proposed model being worked out by the Centre and the states. GST is proposed to be introduced from April 1, 2010, to integrate all indirect taxes on goods and services at the state and the central level.