GST -Horizontal model and Vertical model for administrative control
So far the Central and state governments of India have been discussing two models to divide the administrative control between the Union and state governments.
Two Model of administrative control discussed in India are
- Horizontal model.
- Vertical model.
Horizontal model of GST
Under the horizontal model, the states will have sole control over entities earning up to Rs.1.5 crore a year and dual control of the Centre and states above this level.
Vertical Model of GST
Under the vertical model, both the Centre and states will have control over assessees right from the beginning. This model is called “cross empowerment” too. For scrutiny and audit, the assessees would be divided in a pre-decided ratio between the Centre and states, be it a 50:50 or some other ratio, 75:25.
Why there was need to discuss Horizontal model and Vertical model of GST for Administrative Control.
There is a consensus that the same Assessee sould not be Assesseed by the Center Govt and State Govt at the same time under GST.
The earlier agreement reached between the Centre and states over horizontal model had fallen apart after states expressed keenness to have control over service tax assessees in certain areas such as entertainment tax. According to an earlier proposal, states were to assess businesses with an annual turnover Rs.1.5 crore, while both the Centre and states were to do so for businesses with higher turnover. The Centre and states had earlier agreed that the Centre will have exclusive power over assessees in the services sector, till the state officials were trained to do so. But some states raised objection to this.
States including Kerala, West Bengal, Tamil Nadu, Bihar, Delhi, Odisha, Rajasthan and Uttarakhand want a combination of the vertical and the horizontal model. According to these states, they should have total control over taxpayers with a turnover below Rs.1.5 crore, and there should be a vertical division for assessees with turnover above Rs.1.5 crore. But Centre is not in favour of such a dual control structure.