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CBEC warns that the change in GST model will corrupt small enterprises

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New Delhi: The ongoing debate about whether Central Board of Excise and Customs should have control over small traders in the field of GST (Goods and Services Tax) is far from over.

Last month it was announced by the state that their demand had been met by the centre to have administrative control over traders whose annual revenue is less than ₹ 1.5 crore. But the indirect tax arm has not approved of this move and fears that this act may lead to huge tax evasion by small traders.

The CBEC authorities fear that all the enterprises which have an earning more than ₹ 1.5 crores would to escape taxes deliberately built smaller companies.

The other downside to it is that unlike the centre the state does not have the resources or the time to keep a check on enterprises which will take the smaller business route to evade tax.

Also, the majority of the traders will not be any more in the central government supervision it will for sure give rise to fraud and corruption.

One more point that the centre has brought to the attention is the state is not entirely equipped and does not have expert control over the service tax.

This loophole can not only be beneficial for the entrepreneurs, but there would be no control over the corruption.

Unlike other countries, India is changing the rule of the game by implementing a dual GST model wherein both the centre and the state levy different GST.

There is state run GST and Center GST; wherein other countries follow the model of the centre taking charge of collecting GST and then it divides the amount among the states.

But the problem does not arise here it’s when the state demands that for all enterprises which earn annually below 1.5 crores would come into a category where the state collects the Central GST and the State GST.

But instead, the centre worries that this step will make the entrepreneurs know how to evade tax.

This proposition has created a drift between the state and the centre. It has raised questions like since everything is online so the state concerns of small entrepreneurs suffering in the hand of officials should not be a concern?

The other point is that the state is not familiar with service tax so they will not be able to monitor the tax in that domain.

Now one will have to wait and watch on how the centre and state come to a mutual understanding that is beneficiary for not only both the party but the small entrepreneurs as well.

Read Also: Finance Minister Arun Jaitley to meet State ministers on issues of rate cap and compensation

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Ashutosh Aggarwal
Ashutosh Aggarwal is a Founder and Editor-In-Chief at The GST Blog. He holds Bachelor Degree in commerce. He is pursuing company secretary course and chartered accountancy course. Before started this blog, He worked as an accounts manager in a reputed MNC. Also, having an experience of teaching for all subjects of commerce for five years in his study point.

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