CA Jitendra Panwar

1.The Central Government ‘The Modi Sarkar’ has introduced Constitutional Amendment Bill 122 for Goods & Services Tax (GST) in the Lok Sabha on 19.12.2014. The Bill will came into effect after it passed by both the houses in the parliament i.e. Lok Sabha & Rajya Sabha. To introduce GST, States also will be required to bring in appropriate legislations. The amendments proposed in the Bill are for the purpose of conferring powers both to the Parliament and State legislatures to make laws for levying GST on supply of Goods and Services on the same transaction. The Government intends to introduce GST w.e.f 01-04-2016.

2. The GST on goods and services shall subsume in its repertoire many indirect taxes being levied individually by the Centre and States, thereby removing their cascading effect. This will also provide a national market to enable uniform trade throughout the territory of India. It is expected that GST will simplify and harmonise the indirect tax regime in the country. GST will broaden the tax base, and result in better tax compliance by tax payers. It is proposed to subsume following indirect taxes in GST:

Central Govt. Levy: Central indirect taxes and levies such as Central Excise Duty, Additional Excise Duties, Excise Duty levied under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, Service Tax, Additional Customs Duty commonly known as Countervailing Duty, Special Additional Duty of Customs, and Central Surcharges and Cesses so far as they relate to the supply of goods and services;

State Govt. Levy: State Value Added Tax/Sales Tax, Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States), Octroi and Entry tax, Purchase Tax, Luxury tax, Taxes on lottery, betting and gambling; and State cesses and surcharges in so far as they relate to supply of goods and services;

Salient features of Constitutional (122nd Amendment) Bill, 2014:

The Bill proposes three new definitionsin Article 366 of the Constitution as under:

366(12A) : ‘Goods and Services tax’ means any tax on supply of goods or services or both except tax on the supply of alcoholic liquor for human consumption.

366(26A) : ‘Services’ means anything other than goods.

366(29B) : ‘State’ for the purposes of articles 246A, 268, 269, 269A and 279A to include a Union Territory with Legislature.

New Article 246A is proposed to be inserted to provide for levy of GST simultaneously by the Centre as well as by the States. It is also proposed that the Parliament shall have the exclusive powers to levy GST on supply of goods and services taking place in the course of inter-State trade or commerce. Under an Explanation, the provisions of this Article in respect of petroleum crude, high speed diesel, motor spirit (petrol), natural gas and aviation turbine fuel shall take effect only from the date recommended by the GST Council. However, the taxing powers of the Centre and States in relation to these products under the Seventh Schedule has not been made subject to this Article.

Article 248, 249, 250, 268, 268A & 269 are amended to give effect to article 246A.

Article 268 is proposed to be amended by deleting word ‘duties of excise on medicinal and toilet preparations’ so as to bring these products under GST.

New Article 269Ais proposed to insert for levy of GST on inter-State supply of goods and services by the Centre. This tax shall be apportioned in the manner provided by the Parliament on the recommendation of the GST Council. Under this Article, supply of goods and services in the course of import into the territory of India shall be deemed to be inter-State supplies. It is proposed that Parliament may formulate the principles for determining when a supply takes place in the course of inter-State trade or commerce. This Article will enable levy of GST on import of goods and services. Appropriate provisions will have to be made for determining the levy of IGST on such imports particularly where the rates of taxes may not be uniform across all States.

Article 270 is proposed to be amended to include any GST collected by the Centre on inter-states supplies and which has not been apportioned to the states under the new Article 269A.

New Article 279A is proposed to be inserted for enabling formation of ‘Goods and Services Tax Council’ (GST Council). The GST Council shall be constituted by the President within 60 days from the date of commencement of the Amendment Act. Union Finance Minister will be the Chairperson of this council. The Union Minister of State in charge of Revenue or Finance and the State Finance and Taxation Ministers will be the members. The GST Council would make recommendations to the Centre and the States on the taxes to be subsumed into GST, the goods and services which should be taxed and exempted, the model GST law, principles of levy, apportionment of IGST, place of supply principles, threshold limits, rates including floor rates with bands, special rates for raising additional resources during any natural calamity or disaster and special provisions for Arunachal Pradesh, Assam, Jammu and Kashmir, Meghalaya, Manipur, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand.

  1.      It is also proposed to levy of Integrated Goods and Services Tax on inter-State transactions of goods and services. The GST Council would also recommend the date from which GST should be levied on petroleum crudes, high speed diesel, motor spirit (petrol), natural gas and aviation turbine fuel. The decisions of the GST Council would be by a majority determined on the basis of prescribed formula in this bill. The GST Council would also decide about the modalities to resolve disputes arising out of its recommendations. The GST Council would thus play a recommendatory role and its recommendations would not be binding. It will not be resolving disputes on GST but would only lay down the modalities for resolving disputes.

Article 286 is proposed to be amended by substituting reference to ‘sales and purchases’ and ‘goods’ with supply of goods or services. It is further proposed to amend this article to delete sub-article (3), which imposed restrictions on taxation of goods of special importance (declared goods). This will enable levy of GST at a higher rate.

‘Additional Tax’– The Bill, vide section 18, proposes to levy ‘additional tax’ on the supply of goods in the course of inter-State trade or commerce at a rate not exceeding 1% for 2 years or such other period as the GST Council may recommend. This tax would be levied and collected by the Centre and would be assigned to the States from where the supply originates and the proceeds would not form part of the Consolidated Fund. The Parliament, would formulate the principles for determining the place of origin.

Coverage of all goods and services, except alcoholic liquor for human consumption, for the levy of goods and services tax. In case of petroleum and petroleum products, it has been provided that these goods shall not be subject to the levy of Goods and Services Tax till a date notified on the recommendation of the Goods and Services Tax Council.

Amendments in the Sixth and Seventh Schedule to the Constitution have been proposed as below:

Sixth Schedule – Paragraph 8 – It is proposed to enable District council for an autonomous district shall have the power to levy and collect taxes on entertainment and amusements within such District.

Seventh Schedule List 1 – Entry 84 – This entry has been amended to restrict the powers of the Centre to levy excise duty only on manufacture or production of petroleum crude, high speed diesel, motor spirit (petrol), natural gas, aviation turbine fuel and tobacco and tobacco products. While tobacco and tobacco products would also be subjected to GST, petroleum products and natural gas would be brought within the coverage of GST at a subsequent date.

 Seventh Schedule, List 1, Entries 92 and 92C – These entries are proposed to be omitted. These relate to taxes on sale or purchases of newspapers and on advertisements therein and tax on services.

Seventh Schedule, List II – Entry 52 – This entry relating to tax on entry of goods into a local area for consumption, use or sale therein is proposed to be omitted.

Seventh Schedule, List II – Entry 54 – This entry is proposed to be substituted to enable States to levy tax on sales or purchases of petroleum crude, high speed diesel, motor spirit (petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption, other than sales in the course of inter-State trade or commerce or in the course of international trade or commerce.

 Seventh Schedule, List II – Entry 55 – This entry in relation to taxes on advertisements other than advertisements published in newspapers and advertisements broadcast by radio and television is proposed to be deleted.

 Seventh Schedule, List II – Entry 62 – The existing entry relating to taxes on luxuries, including taxes on entertainments, amusements, betting and gambling is proposed to be substituted. The new entry is proposed to enable levy of taxes on entertainment and amusements to the extent levied and collected by a Panchayat or a Municipality or a Regional Council or a District Council.

4.     It is also proposed in the Bill to provide compensation to the States for loss of revenue on account of implementation of GST for a period upto 5 years. The Parliament will provide for the compensation on the recommendation of the GST Council.

  1.     The Bill states transitional provisions that any provision of any law relating to tax on goods or services or on both in force in any State immediately before the commencement of the Act, which is inconsistent with the amendments carried out the Constitution, shall continue to be in force until amended or repealed by the State Legislature or other competent authority or until expiration of one year from the commencement of the Act, whichever is earlier.

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