The much awaited constitutional bill was presented by the Union Finance Minister on 19th November 2014.The idea about the GST was first initiated by the former Union Finance Minister Mr. P. Chidambaram. Under the UPA Regime by introducing 115th Constitutional Amendment Bill 2011. But he failed to make the consensus between the Centre and the State. Since its first day, the BJP led NDA government was trying to push the biggest tax reform since 1947.The Finance Minister repeated the importance of the GST I the Union budget.
This bill will enable the Centre and the State Government (Including Union Territory) to draft the CGST and SGST Law respectively. The detailed analysis of bill is as under:
Insertion of New Article 246A :- The Article 246 gives power to the Union and the State government to make the law relating to the matter covered under List I (Union List), List II (State List) and List III (concurrent List). The Article 246A(1) gives right to the parliament and the legislator of every state can make the law in respect of the goods and service tax to be imposed by the central or state government. This amendment will subsume the taxes like Excise duty, Service tax, Central Sales tax at Central level and VAT, Entry tax, Entertainment tax etc. at State level.
The Article no 246A(2) covers the provision of the Interstate supply of goods or services or both ,in such circumstances only the parliament (i.e. Central Government) can make the Law. But, the provision of article 246A, in case of Petroleum crude, high speed natural gas, petrol and aviation turbine fuel will take effect from the date recommended by the GST council as constituted under Article 279A.
Amendment of Article 248(1) (residuary Power of legislation):-Under Article 248(1) the Parliament has exclusive power to make any law in respect of any item not covered under the State List and Concurrent List subject to provision Article 246A
Amendment of Article 249 (1) (Power of Parliament to legislate with respect to a matter in the State List in the national interest):- The Parliament under article 249(1) can make law in respect of any item specified in the state list in the national interest, if the Council of States has declared by a resolution and supported by 2/3rd of member present and vote. This also includes the goods and service tax under article 246A i.e. Parliament of India can make GST law for the whole or any part of India subject to approval 2/3rd members of each state.
Amendment of Article 250(1) (Proclamation of Emergency) :- In the event of announcement of an emergency, Parliament of India has the power to make the laws in respect of any item covered under the state list for the whole India or part of the India under article 250(1). The Goods and service tax under article 246A i.e. Parliament of India can make the GST law in case of emergency.
Amendment of Article 268 (1) (Duties levied by the union but collected by the States): – Article 268 (1) provides provision of levy of stamp duty and excise duty on the medicinal and toilet preparation by the union government and collection by state (In case of State) or by union (In case of union territory). The duties of excise on medicinal and toilet preparation has been omitted and same has been amalgamated in GST.
Amendment of Article 268A (Service tax levied by union government and collected and appropriated by Union & States):- Article 268A provides power to the government of India to levy the service tax and collected and apportioned by government of India and State. Now, this article has been omitted.
Amendment of Article 269 and Insertion of New Article 269A (Inter State Sale and Purchase):-Article 269 (1) facilities the levy and collection of tax on the sale of goods or consignment of goods in the course of Interstate trade or Commerce. Now, the provision of this clause is subject to a new article 269A. As per Article 269A the Goods and Service tax will be levied and collected by the Government of India and apportioned between States in the manner as provided in the law by parliament on the recommendation of the GST council.
Further, the Parliament of India will formulate the law in respect of the tax on interstate trade of goods and services. In addition to the above import of goods or Services or both will also be equally treated as the Supply of the goods and services in the course of an Inter-State trade or Commerce. This will give power to the central government to levy the IGST on the Import transaction instead of CVD levied under existing Act.
Amendment of Article 270(1) (Levy and Distribution between union and state):- Article 270(1) provides the distribution of certain taxes between the union and the states as per clause (2) of Article 270. The Interstate GST has been kept outside from the provision of the above article. Because the provision of the distribution of revenue in case of an Interstate GST is already incorporated under 269A. Therefore, the same is excluded from the purview of 270(1). However, revenue of the GST other than an Interstate GST will be distributed between the Union and State according to Clause (2) of Article 270.
Amendment of Article 271 (Surcharge on taxes by union):- The Parliament has the exclusive right to charge the surcharge on any tax and such surcharge will form the part of consolidated fund. But GST is exception to above the article. In other words, the parliament cannot charge any tax by way of surcharge on the GST.
Insertion of Article 279A (Constitution of Goods and Service tax Council):- With the insertion of Article 279A, the President of India has the power to constitute Goods and Service tax Council (GST Council) within 60 days from the date of commencement of this act.
The Council will consist following members:
Chairman: – The Union Finance Minister
Member: – Union Minister of State Revenue/Finance
Member: – Minister in charge of Finance/taxation of each State government
The members for the committee will decide Vice-Chairperson amongst them for such period as may decide.
The council will make the recommendation on rate of the GST, surcharges, Exemptions, Model of GST law, Place of Supply rules, and special rate of the GST, Special Provision for North east states or any other matter as decided by the council.
The Council will decide the date when the GST be levied on petroleum crude, high speed, petrol, natural gas and aviation turbine fuel
The quorum of meeting must be 1/2nd (50%) total members.
Every decision of the council must be taken by a majority of members consisting 3/4th (75%) of total weighted votes of members present and voting.
The vote of the Central government will have weight of 1/3rd of total vote cast
The vote of the State governments together will have the weightage of 2/3rd of total vote cast
Amendment of Article 286 (Restriction on Imposition of tax):- Article 286 restricts the state laws from imposition of any tax on the sale or the purchase of goods outside the state or in the course of the import of the goods into, or export of the goods out of, territory of India. Now, the Supply of goods or service or both will be covered by this clause. This clause will restrict states from imposition of the Interstate GST and same will be levied by the union government under Article 269A as mentioned earlier.
Amendment of Article 366 (Definition): Article 366 covers the various definitions. As per new clause 12A to Article 366 “Goods & Service tax” means any that tax on the supply of Goods or Services or both except taxes on the supply of the alcoholic liquor for human consumption. The term service is also defined by inserting a new clause 26A as, anything other than goods. The definition of service is much broader now as compared to earlier one which is defined in finance act 1994.
Amendment of Article 368 (Power to parliament to amend the constitution):- Article 368 gives power to the Parliament to amend any provision of the constitution of India by introducing such change into the each house of parliament and get sanctioned from 2/3rd majority of the membership of the house present. It will then present to The President for his assent and then it becomes an act. Nevertheless, if the amendment is related with any matters of the State, such an amendment must be ratified legislature of the States by 50% resolution before presentation of the same for President’s assent. Now Article 279A is also covered under the provision of Article 368. It means any change in Article 279A will also be ratified by the State legislator beside the Sanction of each house of Parliament and before the assent of President.
Amendment in Sixth Schedule (Powers to access and collect land revenue and to impose tax):- Under Para no 8 of the sixth schedule the District council of an autonomous district will have the power to levy & collect taxes on professions, employment, animal, trades, vehicle, boat, on entry of goods, for maintenance of school, dispensaries or road. Now additionally, such District may levy the taxes on Entertainment and Amusement.
Amendment in Seventh Schedule (Union List, State List and Concurrent List):- Seventh schedule to the constitution covers the basic Structure of the Indian taxation. The rights of taxation are given to both i.e. the Central government under List I (Popularly known as Union List) and to the State under the List II (Popularly known as State List). Due to insertion of Article 246A, it is imperative to amend the Union list and the State list to make the proper arrangement of the GST.
The amendments are as follow:
Amendment in Entry No 84, 92, 92C to Union List: As per Entry No 84 Duties of excise will be levied on tobacco and other goods manufactured or produced in India except alcoholic liquor for human consumption, narcotics, opium and Indian hemp. Now, the excise duty has been subsumed by Article no 246A. Henceforth, new Entry no 84 will cover the Excise duty on petroleum crude, high speed, natural gas, petrol and aviation turbine fuel, tobacco and tobacco products. It means even after the introduction of the GST, Central Excise duty on above product will remain in force till the time as GST council thinks fit.
Further, the entry no 92 and 92 C covering the tax on sale or purchase of newspaper and Service tax respectively have been omitted as they are already merged Into the GST.
Amendment in Entry No 52, 54, 55 and 62 to State List: – The entry no 52 gives power to levy the entry tax. Now, the entry has been omitted. This means that now local bodies cannot levy and collect the entry taxes like octroy, LBT etc.
Under Entry No 54 the State government can collect tax on sale or purchase of goods other than newspaper. Now, the State government can only collect taxes on the sale of petroleum crude, high speed, petrol, natural gas and aviation turbine fuel and alcoholic liquor for human consumption. Further, now the State government cannot levy the tax on advertisement under Entry No 55.
In addition to the above, the Panchayat, Municipalities, Regional or District council can levy and collect taxes on entrainment and amusement under entry 62.
Levy of addition 1% tax by States: – To protect the revenue loss of the manufacturing state additional 1% tax will be levied by the State on the sale or purchase in the course of an interstate for the period of 2 years of such extended period as allowed by the GST council. Entire revenue from such addition levy will kept by the state from where supply of goods take place. The Government of India may, where it considers necessary in the public interest, exempt such goods from levy of tax
Compensation to States for Revenue Loss: – Parliament may by law and with the recommendation of the GST council, provide a compensation to the State on account of implementation of the GST. The period of compensation is restricted up to 5 years.
Translation Provision:- If the provision of the State Law is inconsistent with the constitution after commencement of these act will be valid till the amendment by competent legislator or authority or one from commencement of these act whichever is earlier.
Power of president to remove the difficulty: – If any difficulty arises after the commencement of these act, the President may by order remove such difficulty. Provided that no such order is made after expiry of three years from the commencement of these act.
Every such order will be soon laid before each house of parliament.