A proposal to do away with state-wise GST compliance in favour of a single, nationwide registration has been turned down by states, stalling one of the more ambitious recommendations of the Rajiv Gauba-led High-Level Committee on Regulatory Reforms, three government sources said.
There is also an unresolved question of how goods and services tax (GST) revenue would be apportioned among states if a company functioned under one national number instead of separate state registrations, the sources said.
“The proposal was made with the objective of simplifying the GST system, but the states are not agreeing to it because they feel it could dilute their administrative authority,” one of the sources told Moneycontrol.
They worry losing the power to register, assess and take enforcement action against such businesses, sources said.
The 57th GST council meeting is scheduled for September 12 in New Delhi.
Why states are pushing back
The panel’s proposal sought to extend the logic of PAN — a single identifier valid across the country — to GST registration, removing the need for businesses operating in multiple states to register separately in each one.
A service provider based in Delhi but operating in Maharashtra, for instance, needs a separate Maharashtra registration — a duplication the panel wanted to eliminate.
States see a more specific risk.
The official said that if a company operating under a single national GST number committed a fraud in a state where it lacked a separate registration, the local commissioner may not have the power to directly proceed against it. This marks a contrast to the current system, where a state can take direct action against any company maintaining an office or establishment within its jurisdiction.
“That is one of the key concerns because the states do not want to give up their powers to act against businesses operating within their jurisdiction,” the source said.
“The argument from the states is that they do not want to lose control over enforcement,” the second source told Moneycontrol. Since GST runs on Centre-state consensus, a change of this scale cannot go through without states on board, the source added.
Broader reforms to continue
A third government source told Moneycontrol that the setback does not mean the government is stepping back from GST simplification.
“The single GST registration was one of the reforms that was suggested but it has been rejected by the states because they do not want to lose their authority. So, while a number of GST reforms have been suggested to simplify the system, not every reform can necessarily be implemented if the states do not agree,” the source said.
The same source linked the caution to fiscal headroom after the rate rationalisation under GST 2.0. “We cannot keep reducing the tax base or raising thresholds simply in the name of simplification… The approach has to be to broaden the tax base while keeping tax rates reasonable,” he said.
Most procedural reforms, including simplifying the registration application, can still move ahead since the digital infrastructure needed is largely in place.
Sources indicated the government will keep pursuing measures to ease registration, compliance and return filing even as the single-registration idea stays shelved for now. Reviving it would need the Centre to first address states’ concerns.
