Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Introduction of GST Law [Constitution (101st Amendment) Act, 2016]

Introduction of GST Law [Constitution (101st Amendment) Act, 2016]
Introduction of GST Law [Constitution (101st Amendment) Act, 2016]

(A) Need for constitutional amendment

Existing Constitutional provisions, given above, had given separate powers for the Centre and the States to  impose various taxes.

Whereas the Centre levied excise duty on all goods produced or manufactured in India, the States levied  Value Added Tax on the Intra-State of sale of goods.

In the case of inter-State sales, the Centre had the power to levy the Central Sales Tax, but the tax was  collected and retained entirely by the States.

Services were exclusively taxed by the Centre in the form of service tax.

Besides, there were State specific levies like entry tax, Octroi, luxury tax, entertainment tax, lottery and  betting tax, local taxes levied by Panchayats, etc.

With respect to goods imported from outside the country into India, Centre levied basic customs duty and  additional duties of customs.

Introduction of the GST required amendment in the Constitution so as to enable integration of—

— the central excise duty including additional duties of customs on imports,

— service tax

— State VAT

— and certain State specific taxes

levied by the Centre and States into a comprehensive Goods and Services Tax and to empower both Centre and  the States to levy and collect it.

Consequently, Constitution (101st Amendment Act), 2016 was passed.

(B) Important amendments brought in by the Constitution [(101st Amendment) Act, 2016 ]

The following important amendments were brought in by the Constitution (101st Amendment) Act, 2016:

1. Constitution of Goods and Services Tax Council [Article 279A applicable w.e.f. 12.9.2016]

(1) The President shall, within 60 days from the date of commencement of the Constitution (One  Hundred and First Amendment) Act, 2016, by order, constitute a Council to be called the Goods and  Services Tax Council (GST Council).

(2)        The Goods and Services Tax Council shall consist of the following members, namely:—

(a) the Union Finance Minister — Chairperson;
(b) the Union Minister of State in charge of Revenue or Finance — Member
(c) the Minister in charge of Finance or Taxation or any other Minister  nominated by each State Government — Members.

(3)        The Members of the Goods and Services Tax Council referred to clause (2)(c) above shall, as soon as  may be, choose one amongst themselves to be the Vice-Chairperson of the Council for such period as  they may decide.

(4)        The Goods and Services Tax Council shall make recommendations to the Union and the States on—

(a)          the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may  be subsumed in the goods and services tax;

See also  Constitutional Background of GST [Pre-GST Regime]

(b)          the goods and services that may be subjected to, or exempted from the goods and services tax;

(c)           model Goods and Services Tax Laws, principles of levy, apportionment of Goods and Services  Tax levied on supplies in the course of inter-State trade or commerce under article 269A and the  principles that govern the place of supply;

(d)          the threshold limit of turnover below which goods and services may be exempted from goods and  services tax;

(e)          the rates including floor rates with bands of goods and services tax;

(f)           any special rate or rates for a specified period, to raise additional resources during any natural  calamity or disaster;

(g)          special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir,  Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand;  and

(h)          any other matter relating to the goods and services tax, as the Council may decide.

(5)        The Goods and Services Tax Council shall recommend the date on which the goods and services tax  be levied on petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural  gas and aviation turbine fuel.

(6)        While discharging the functions conferred by this article, the Goods and Services Tax Council shall  be guided by the need for a harmonised structure of goods and services tax and for the development  of a harmonised national market for goods and services.

(7)        One-half of the total number of Members of the Goods and Services Tax Council shall constitute the  quorum at its meetings.

(8)        The Goods and Services Tax Council shall determine the procedure in the performance of its  functions.

(9)        Every decision of the Goods and Services Tax Council shall be taken at a meeting, by a majority of  not less than three-fourths of the weighted votes of the members present and voting, in accordance  with the following principles, namely:—

(a)          the vote of the Central Government shall have a weightage of one third of the total votes cast, and

(b)          the votes of all the State Governments taken together shall have a weightage of two-thirds of the  total votes cast, in that meeting.

(10)      No act or proceedings of the Goods and Services Tax Council shall be invalid merely by reason of—

(a)          any vacancy in, or any defect in, the constitution of the Council; or

(b)          any defect in the appointment of a person as a Member of the Council; or

(c)           any procedural irregularity of the Council not affecting the merits of the case

(11)      The Goods and Services Tax Council shall establish a mechanism to adjudicate any dispute —

(a)          between the Government of India and one or more States; or

(b)          between the Government of India and any State or States on one side and one or more other  States on the other side; or

See also  Salient Features of GST & IGST

(c)           between two or more States,  arising out of the recommendations of the Council or implementation thereof.

2. Power to make laws with respect to Goods and Services Tax [Article 246A, w.e.f. 16.9.2016]

(1)        Notwithstanding anything contained in Articles 246 and 254, Parliament and, subject to clause (2),  the Legislature of every State, have power to make laws with respect to goods and services tax  imposed by the Union or by such State.

“Subject to clause (2)” mentioned above means that the Legislature of the States shall not have  power to make law relating to clause (2) given below i.e. relating to supply of goods, or of  services, or both which takes place in the course of inter-State trade or commerce.

(2)        Parliament (i.e. Central Government) has exclusive power to make laws with respect to goods and  services tax where the supply of goods, or of services, or both takes place in the course of interState trade or commerce.

Thus, this article grants power to Central and State Governments to make laws with respect to GST  imposed by Centre or such State.

Further, the Central Government has the exclusive power to make laws with respect to GST in case  of inter State supply of goods and/or services (IGST).

However, as per Article 279A(5) (see above), in respect to the following goods, the Goods and  Services Tax Council shall recommend the date on which the goods and services tax be levied—

(i) petroleum crude,

(ii) high speed diesel,

(iii) motor spirit (commonly known as petrol),

(iv)  natural gas and

(v) aviation turbine fuel (ATF).

3. Levy and collection of GST on inter-State supply [Article 269A]

(1)        Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied  and collected by the Government of India and such tax shall be apportioned between the Union and  the States in the manner as may be provided by Parliament by law on the recommendations of the  Goods and Services Tax Council.

This tax shall be called as Integrated Goods and Service Tax (IGST)

Further, supply of goods, or of services, or both in the course of import into the territory of India  shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or  commerce. [Explanation]

The above Explanation will give power to Central Government to levy IGST on the import  transactions which were earlier subject to Countervailing duty and special additional duty of customs  under the Customs Tariff Act, 1975.

(2)        Where an amount collected as IGST has been used for payment of SGST or vice versa, such amount  shall not form part of the Consolidated Fund of India. This is to facilitate transfer of funds between  the Centre and the States.

(3)        Parliament is empowered to formulate the principles regarding—

(i)           place of supply, and

(ii)          when supply of goods, or of services, or both occurs in inter-State trade or commerce.

In view of the above, the provisions regarding the “place of supply” and “when supply of goods, or of  services, or both occurs in inter-State trade or commerce” have been incorporated only in the  Integrated Goods and Service tax Act, 2017 passed by the Parliament.

4. Meaning of “Goods and Services Tax” [Article 366(12A)]

“Goods and services tax” means any tax on supply of goods, or services or both except taxes on the  supply of the alcoholic liquor for human consumption.

The alcoholic liquor for human consumption has been kept out of GST. Thus existing provisions of State  excise and VAT shall apply in the case of alcoholic liquor for human consumption.

1. Meaning of services: Services here means anything other than goods.

2. Meaning of goods: The term goods has already been defined under Article 366(12) in an inclusive  manner to provide that “goods includes all materials, commodities, and articles”.

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