Minutes of the 9th meeting of the GST Council, held on January 16, 2017 record that the states have been given a leeway to tweak the criteria for division of taxpayers after consultation with Centre in respect of the proposed Goods and Services Tax (GST). This concession is over and above the agreed upon 90:10 division of tax assessees below the annual turnover threshold of Rs 1.5 crore between states and Centre, respectively, and an equal division of assessees for a turnover above Rs 1.5 crore.

 “…states wanting a different basis of division could do so in consultation with the Centre; the division of taxpayers in each state shall be done by computer at the state level based in stratified random sampling and could also take into account the geographical location and type of the taxpayers, as may be mutually agreed,” the minutes stated.

The division of taxpayers will be switched between the Centre and the states at regular intervals as per the decision of the Council. For new registrants, the Council has agreed to do equal division between the Centre and the states.

During the course of the discussions, states such as West Bengal and Kerala supported the demand for exclusive control by states on taxpayers below the Rs 1.5 crore turnover threshold, while Gujarat and Maharashtra stated their preference for vertical division with control of two-third taxpayers with states and one-third of the assessees with the Centre.

CBEC chairman Najib Shah was of the view that neither the Central nor state tax administration should be completely ousted from any part of the value chain in order to ensure proper checks and balances. During the discussions, he also stated that there could be cross empowerment for granting tax refund subject to agreement by the accounting authorities.