Is GST exemption threshold for NE discriminatory?

Monday, 18 January 2021


Is GST exemption threshold for NE discriminatory?

Rahul Chanda | July 01, 2017 11:43 hrs

The North East Industrial and Investment Promotion Policy (NEIIPP) has already been stopped raising questions about the Centre’s route map of how it intends to develop the north-eastern states. With the GST all set to be implemented in the country, the critics are calculating what the north-eastern region will gain from the biggest tax reform of the country. The exemption threshold for GST is Rs 20 lakhs for the entire country but in the NE states and two other hill states the exemption threshold is Rs 10 lakhs. Will this be beneficial to the region or is it discrimination? 

The critics

Suresh Ranjan Goduka, a senior journalist who is a founder of a magazine, talking to G Plus said, “GST will not apply up to Rs 20 lakhs turnover in rest of the country but for Assam and other north-eastern and hill states, GST will apply if turnover exceeds Rs 10 lakhs. This is a serious discrimination and will obviously adversely affect the small entrepreneurs of states like Assam. I wonder why the finance minister of Assam accepted this at the GST Council meet and why there has not been any protest by any state level business or public association.” He further said that there are many businesses in the northeast which have a yearly turnover of Rs 10 lakhs to Rs 20 lakhs and these small-scale industries are vital for the development of the region. But the decision of the Centre is akin to discrimination for Assam and the other states of the region. 

President of Kamrup Chamber of Commerce, Mahavir Jain, talking to G Plus said that no matter what the tax exemption is, the people of this region will anyway have to pay more tax as northeast is 2,000 kilometres away from the mainland India (New Delhi). He said, “The tax exemption to the north-eastern states should have been double the exemption provided to the rest of the country. So if it is Rs 20 lakhs for the rest of the country northeast should have got Rs 40 lakhs as the exemption threshold for GST.” Jain further said that the people of northeast will surely suffer after GST is implemented as at the village level there are lesser labourers and because of the transportation cost things will be costlier and people this side will have to pay more tax. 

Similarly, many people slammed the exemption threshold and dubbed it as discrimination towards the north-eastern states.

The defence

Regional director of Indian Chamber of Commerce, Ishantor Sobhapandit, talking to G Plus said that the exemption threshold for northeast at Rs 10 lakhs is not discrimination as it will be increased later. He said that many MSMEs in the north-eastern region are not registered tax payers and all these days many business establishments were used to not paying taxes. So the GST is designed in such a way that initially bringing all these businesses under the GST purview was important. He said that with Rs 10 lakhs as the exemption limit, many MSMEs will now have to register under GST and things will be clearer. He also said that in the near future the exemption limit will be increased. 

City-based CA, Sandeep Khaitan, talking to G Plus said that the exemption threshold of Rs 10 lakhs was sought by the state government and was not decided by the central government. He said that previously the exemption threshold for VAT in the state was Rs 6 lakhs. So the government thought that if it was directly raised to Rs 20 lakhs, it would be a huge burden to the small businesses. Therefore, it was decided that the exemption threshold should be Rs 10 lakhs so that it is not a very huge jump on the exemption limit. 

There might be various answers to the questions but the fact remains that Rs 20 lakhs for rest of the states and Rs 10 lakhs for the north-eastern states is a massive difference. And if it is a one-tax-one-nation concept, the very idea of starting with a difference might create many differences.

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