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Constitution (One Hundred and Fifteenth Amendment), Bill, 2011 (GST Bill) as introduced in the Parliament on 22 March 2011, deals with key transaction taxes in India. The proposed GST Bill, inter alia seeks to introduce articles effecting the introduction of the Goods and Services Tax (GST) and the introduction of the GST Council. As per the existing structure of indirect taxation, the Parliament has the power to make laws on the manufacture of goods and the provision of services (Union List) while the State Legislatures have the power to make laws on the sale and purchase of goods within their respective states (State List). The Parliament has retained the exclusivity to make laws pertaining to sale of goods in the course of inter-state trade or commerce.
Definition of Goods and Services – Article 366
1. Clause 12A has been inserted to the above Article which defines ‘Goods and Services Tax’ to mean, any tax on supply of goods or services or both except taxes on the supply of:
> Petroleum Crude;
> High Speed Diesel
> Petrol
> Natural Gas
> Aviation Turbine Fuel; and
> Alcoholic Liquor for human consumption.
2. Clause 29A, relating to deemed sale (i.e. tax on leases and works contract) has been proposed to be omitted from the Article as it will be subsumed within GST.
Amendment to Schedules to Constitution
Sixth Schedule
The District Council for an autonomous district shall have the power to levy tax on entertainment and amusements within such districts
Seventh Schedule
1. The Union Government has the exclusive power to levy excise duty on the manufacture or production of the following
> Petroleum Crude
> High Speed diesel
> Petrol
> Natural Gas
> Aviation Turbine Fuel
> Tobacco and Tobacco Products
2. Entries relating to sale or purchase of newspapers and on advertisements published in such newspapers and the Taxes on services have been omitted thus facilitating the levy of GST on sale and purchase of newspapers and advertisements therein.
3. Only the municipalities or the Panchayat shall have the power to levy tax on the entry of goods into a local area for consumption, use or sale therein and also tax on entertainment and amusement.
4. The State Governments shall have the power to levy tax on the sale (other than in the course of inter-state trade or commerce) of petroleum crude, high speed diesel, petrol, natural gas, aviation turbine fuel and alcoholic liquor for human consumption.
Introduction of Article 246 A
1. As per the proposed Article, the Parliament and the Legislature of every State will have concurrent power to make laws with respect to goods and services tax.
2. The above power is subject to the condition that the Parliament will have the exclusive power to make laws with respect to goods and services tax where the supply of goods or services or both takes place in the course of inter-state trade or commerce.
Amendments to other Articles
Residuary powers of the Parliament – Article 248
The residuary power of the Parliament to make laws under the Concurrent List has been made subject to the provisions of restriction under Article 246A
Power of Parliament to make laws on subjects in State list in national interest – Article 249
The Parliament has been vested with the power to make laws pertaining to GST on behalf of the state Legislature in circumstances of national interest. The power to make such laws would be pursuant to a resolution passed by the Council of States supported by not less than a two-thirds majority of the members present and voting.
Power of Parliament to make laws on subjects in State List in the case of Emergency – Article 250
The Parliament has been vested with the power to makes laws pertaining to GST on behalf of the State Legislature when there is a proclamation of Emergency.
Duties levied by Union but collected and appropriated by the States -Article 268
- Excise duty on medicinal and toilet preparations (containing alcohol, narcotic and psychotropic substances), which are mentioned in the Union List has been omitted for the purpose of this Article.
- The effect of this omission is that the excise duty on medicinal preparation and psychotropic and toilet preparations would be subsumed within the proposed GST.
Levy of GST in the course of inter-state trade or commerce —Article 269A
- The GST on supplies of goods or services or both in the course of inter-state trade or commerce shall be levied and collected by the Union Government and shall be apportioned between the Union and the States which would be prescribed by the Parliament.
- It has been clarified that supply of goods or services or both in the course of import into India shall be deemed to be a transaction of inter-state trade or commerce
- The Parliament shall formulate the principles to determine when supply of goods or of services or both shall be treated as inter-state trade or commerce.
Distribution of GST between the Union and the States–Article 270
A new clause has been inserted whereby the GST which has been collected by the Government of India shall be distributed to the States on such percentage as may be determined by the President or the Finance Commissioner (as the case may be).
No surcharge on GST -Article 271
No surcharge under this Article would be applicable to GST
GST Council – Article 279A
The President shall constitute a GST Council within sixty days from the Commencement of the GST Act.
Membership of the GST Council
- The Union Finance Minster would be the Chairperson, the Union Minister of State for Revenue shall be one of the members, the Finance Minister or any other minister nominated by each State Government shall be the members of the GST Council.
- The Members of the GST Council shall decide on the Vice-Chairperson of the GST Council for such period as decided by the members.
Functions of the GST Council
The GST Council while being guided by the need for a harmonized structure goods and services tax and for the development of a harmonised national market for goods and services shall make recommendations to the Union and the States on:
> Taxes, cesses and surcharges levied by the Union and the States and local bodies which may be subsumed within the GST
> Exemptions from GST for such goods and services
> Threshold limit of turnover below which GST may be exempted
> The GST rates
> Any other matter relating to GST
Other procedural issues relating to GST Council
One third of the total members of the GST Council shall constitute the quorum at the meetings The GST Council shall formulate its own procedures in the performance of its functions. Every decision of the GST Council taken at a meeting shall be with the consensus of all the members present at the meeting.
Any act or proceeding of the GST Council shall not be invalidated merely by reason of (i) vacancy or defect in the constitution of the Council or (ii) defect in the appointment of a person as a member in the GST Council or (iii) any irregularity in the procedure adopted by the GST Council not affecting the merits of the decision.
GST Dispute Settlement Authority – Article 279B
- The Parliament, by law, will provide for the creation of a Goods and Services Tax Dispute Settlement Authority (DSA) which shall adjudicate any dispute or complaint referred to the DSA by the State Government or the Union Government arising out of deviation from any recommendation of the GST Council which results in the loss of revenue to the State Government of the Union Government or affects the harmonised structure of the GST.
- The DSA shall consist of three members namely, the Chairperson, who has been a Supreme Court Judge or the Chief Justice of a High Court, appointed by the President, recommended by the Chief Justice of India; the remaining members shall be persons who shall have expertise in the field of law, economics or public affairs appointed by the President recommended by the GST Council.
- The DSA shall pass suitable orders including interim orders
- Only the Supreme Court shall exercise jurisdiction over such adjudication or dispute or complaint.
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