The ‘GST’ Constitution Amendment Bill, (No. 192 of 2014) – Facilitating GST Law (An Analysis)
By: – CA.Ankit Gulgulia
Goods and Services Tax – GST
Dated:- 31-12-2014
One of the major Indirect tax reforms that the country is now on road to witness is the incarnation of a single GST law instead of multiple indirect taxes viz Service Tax, Central Excise, VAT, CST, Local Body Tax, Entry Tax etc. After a round of discussions of Hon'ble Finance Minister with State FM's, the Government of India has tabled the GST Bill (No. 192 – Constitutional Amendment), 2014 on 19th December,2014.
The clause by clause analysis of GST Bill, 2014 is as under:-
* Insertion of Clause 246A – To Facilitate the Parliament and States to make laws in regard to Goods and Service Tax Imposed by Union or such State
“246A(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 t
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service tax law framing with both the central and state government unlike in the current case where the service tax / excise was centre's domain in union list and sales tax on goods was state's domain except in case of interstate transactions.
Article 246(2) reestablishes the centre's exclusive control on interstate supply of goods and services. Importantly interstate supply of services will mark its separate significance in the proposed GST regime.
Article 279A is proposed for setup of GST Council within 60 days of commencement of this Act, 2014. The items proposed in article 279A (5) includes petroleum crude, high speed diesel, motor spirit (petrol), natural gas and aviation turbine fuel. The date on which GST is to be levied on these items is to be recommended by GST council.
Facilitative amendments in Article 248(1), 249(1), 250(1), 268(1), 269(1), 270(1), 286. Omitting Article 268A.
BRIEF ANALYSIS
Article 248(1) empowers the parliament to make laws on any matters not covere
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tes levy and collection of interstate tax on sale of goods (not services) or consignment of goods but the same to be assigned to states. Now, the interstate supply of goods and services has been made an exception to this pure assignment to states since service now covered. A separate article 269A has been inserted to apportionate the taxes.
Article 270 provides for apportionment of taxes and duties between Union and State. The Interstate GST has been kept out of this by inserting necessary exception. The reason for this exception is since the apportionment in interstate's case is not to be undertaken as per Article 270 laid mechanism but on recommendations of GST council as facilitated under Article 269A. In other cases of GST levied by government of India, a new clause 270(1A) is inserted and apportionment to be in accordance with normal provisions of Article 270 only.
Article 286 imposes restrictions for imposition of taxes on sale or purchases of goods in case of interstate trade,
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ade or commerce.”
BRIEF ANALYSIS
With the beginning of GST, now taxes on supply of goods and service in course of interstate trade or commerce would also required to be made a commodity of due apportionment between union and states instead of pure assignment as in cases of goods. This article 269A is inserted precisely to mitigate this aspect. The apportionment shall be undertaken pursuant to GST Council's recommendation.
To understand what transaction would constitute interstate trade, the rules of supply, origin and point of incidence would be required to be framed. The same would be in parliament's domain.
Surcharge by Parliament not to Apply to GST
Article 271 empowers the parliament to increase taxes and duties on articles. The GST has been made an exception to power of parliament. Hence, the parliament cannot impose surcharge on GST.
Constituting the 'GST Council' vide Article 279A
BRIEF ANALYSIS
Article 279A is to be inserted to empower the Hon'ble President
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e additional resources during any natural calamity or disaster
* 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
* Any other matter relating to the goods and services tax, as the Council may decide.
* Date of levy of GST on items like petrol, diesel and natural gas.
* Quorum shall be 50% of members
* Decision by 75% of total weighted votes of members present and voting. Centre to have 1/3rd of weight of total votes and states to have 2/3rd of total votes cast.
* Dispute resolution modalities.
New Definitions – 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
Hence it would exclude alcoholic liquor currently.
'(26A) “Services” means anything other than goods
Anything other than goods is service reflects wide i
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al councils.
* Entry No. 54 on sale of goods, now scope reduced to petroleum, High speed diesel, petrol, natural gas, aviation turbine fuel and tobacco or tobacco products except in case of interstate trade or international trade or commerce.
Other Modalities
* An additional tax on supply of goods, not exceeding one per cent. in the course of inter-State trade or commerce shall, notwithstanding anything contained in clause (I) of Article 269A, be levied and collected by the Government of India for a period of two years or such other period as the Goods and Services Tax Council may recommend and such tax shall be assigned to the states in manner as provided hereunder in (b)
The net proceeds of additional tax on supply of goods in any financial year, except the proceeds attributable to the Union territories, shall not form part of the Consolidated Fund of India and be deemed to have been assigned to the States from where the supply originates.
The Government of India may, where
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Document 1
TO BE INTRODUCED IN LOK SABHA
Bill No. 192 of 2014
THE CONSTITUTION (ONE HUNDRED AND TWENTY-SECOND
AMENDMENT) BILL, 2014
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A
BILL
further to amend the Constitution of India.
BE it enacted by Parliament in the Sixty-fifth Year of the Republic of India as follows:
1. () This Act may be called the Constitution (One Hundred and Twenty-second
Amendment) Act, 2014.
(2) It shall come into force on such date as the Central Government may, by notification
in the Official Gazette, appoint, and different dates may be appointed for different provisions
of this Act and any reference in any such provision to the commencement of this Act shall
be cons
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ct of goods and
services tax referred to in clause (5), of article 279A, take effect from the date
recommended by the Goods and Services Tax Council.”.
3. In article 248 of the Constitution, in clause (1), for the word “Parliament”, the words,
figures and letter “Subject to article 246A, Parliament” shall be substituted.
4. In article 249 of the Constitution, in clause (1), after the words “with respect to”, the words.
figures and letter”goods and services tax provided under article 246A or” shall be inserted.
5. In article 250 of the Constitution, in clause (1), after the words “with respect to”, the
words, figures and letter “goods and services tax provided under article 246A or” shall be inserted.
6. In article 268 of the Constitution, in clause (1), the words “and such duties of excise
on medicinal and toilet preparations” shall be omitted.
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7. Article 268A of the Constitution, as inserted by section 2 of the Constitution 15
(Eighty-eighth Amendment) Act, 20
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h in the course of inter-State trade or commerce.
(2) Parliament may, by law, formulate the principles for determining the place of
supply, and when a supply of goods, or of services, or both takes place in the course
of inter-State trade or commerce.”.
10. In article 270 of the Contitution,-
(i) in clause (1), for the words, figures and letter “articles 268, 268A and article
269”, the words, figures and letter “articles 268, 269 and article 269A” shall be
substituted;
(ii) after clause (1), the following clause shall be inserted, namely:-
“(IA) The goods and services tax levied and collected by the Government
of India, except the tax apportioned with the States under clause (1) of article
269A, shall also be distributed between the Union and the States in the manner
provided in clause (2).”.
11. In article 271 of the Constitution, after the words “in those articles”, the words,
figures and letter “except the goods and services tax under article 246A,” shall be inserted.
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il 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;
(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 Integrated Goods and Services Tax 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 ma
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jority 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 may decide about the modalities to
resolve disputes arising out of its recommendation.”.
13. In article 286 of the Constitution,
(i) in clause (1),
(A) for the words “the sale or purchase of goods where such sale
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A includes a Union territory with Legislature;'.
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Amendment of
article 368.
Amendment
of Sixth
Schedule.
15. In article 368 of the Constitution, in clause (2), in the proviso, in clause (a), for the
words and figures “article 162 or article 241”, the words, figures
and letter “article 162, article
241 or article 279A” shall be substituted.
16. In the Sixth Schedule to the Constitution, in paragraph 8, in sub-paragraph (3),—
(i) in clause (c), the word “and” occurring at the end shall be omitted;
(ii) in clause (d), the word “and” shall be inserted at the end;
(iii) after clause (d), the following clause shall be inserted, namely:-
“(e) taxes on entertainment and amusements.”
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17. In the Seventh Schedule to the Constitution,-
(a) in List – Union List,-
Amendment of
Seventh
Schedule.
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20
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(i) for entry 84, the following entry shall be substituted, namely:-
“84. Duties of excise on the following goods manufactured or
produced in India, name
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ds, not exceeding one per cent. in the
course of inter-State trade or commerce shall, notwithstanding anything contained in
clause (1) of article 269A, be levied and collected by the Government of India for a period of
two years or such other period as the Goods and Services Tax Council may recommend, and
30 such tax shall be assigned to the States in the manner provided in clause (2).
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(2) The net proceeds of additional tax on supply of goods in any financial year, except
the proceeds attributable to the Union territories, shall not form part of the Consolidated
Fund of India and be deemed to have been assigned to the States from where the supply
originates.
(3) The Government of India may, where it considers necessary in the public interest,
exempt such goods from the levy of tax under clause (1).
(4) Parliament may, by law, formulate the principles for determining the place of origin
from where supply of goods take place in the course of inter-State trade or commerce.
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expiration of one year from such
commencement, whichever
is earlier.
21. (1) If any difficulty arises in giving effect to the provisions of the Constitution as
amended by this Act (including any difficulty in relation to the transition
from the provisions
of the Constitution as they stood immediately before the date of
assent of the President to
this Act to the provisions of the Constitution as amended by this Act), the
President may
,
by order, make such provisions, including any adaptation or modification
of any provision
of the Constitution as amended by this Act or law, as appear to the President
to be necessary
or expedient for the purpose of removing the difficulty:
Provided that no such order shall be made after the expiry of three years from the date
of such assent.
(2) Every order made under sub-section (/) shall, as soon as may be after it is made.
be laid before each House of Parliament.
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15
STATEMENT OF OBJECTS AND REASONS
The Constitution is pro
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t
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;
(b) subsuming of 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;
(c) dispensing with the concept of 'declared goods of special importance' under
the Constitution;
(d) levy of Integrated Goods and Services Tax on inter-State transactions of
goods and services;
(e) levy of an additional tax on supply of goods, not exceeding one per cent. in
the course of inter-State trade or commerce to be collected by the Government of India
for a peri
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Union Finance Minister and will have the Union Minister
of State in charge of Revenue or Finance as member, along with the Minister in-charge
of Finance or Taxation or any other Minister nominated by each State Government. It
is further provided that every decision of the Council shall be taken by a majority of
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not less than three-fourths of the weighted votes of the members present and voting
in accordance with the following principles:-
Illustration:
(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.
In terms of clause (9) of the proposed article 279A, the “weighted votes of the members
present and voting” in favour of a proposal in the Goods and Services Tax Council shall be
determined as under:-
WT= WC+WS
Where,
WT WC+WS =
Wherein-
× SF
SP
===
WT Total weighted vot
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th December, 2014 from
Shri Arun Jaitley, Minister of Finance to the Secretary-General, Lok Sabha.]
The President, having been informed of the subject matter of the proposed Bill,
recommends under clauses (1) and (3) of article 117, read with clause (1) of article 274, of the
Constitution of India, the introduction of the Constitution (One Hundred and Twenty-second
Amendment) Bill, 2014 in Lok Sabha and also the consideration of the Bill.
FINANCIAL MEMORANDUM
Clause 12 of the Bill seeks to insert a new article 279A in the Constitution relating to
Constitution of Goods and Services Tax Council. The Council shall function under the
Chairmanship of the Union Finance Minister and will have the Union Minister of State
incharge of Revenue or Finance as member, along with the Minister in-charge of Finance or
Taxation or any other Minister nominated by each State Government.
2. The creation of Goods and Services Tax Council will involve expenditure on office
expenses, salaries and
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roposed new
article 279A
provides that the President, shall within sixty days from the date of the
commencement of the
Constitution (One Hundred and Twenty-second Amendment) Act,
2014, by order,
constitute a Council to be called the Goods and Services Tax Council. Clause
(8) of the said
article provides that the Council shall determine the procedure in the performance
of its functions.
2. The procedures, as may be laid down by the Goods and Services Tax Council in the
performance of its functions, are matters of procedure and details. The delegation of legislative
power is, therefore, of a normal
character.
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ANNEXURE
EXTRACTS FROM THE CONSTITUTION OF INDIA
*
248. (1) Parliament has exclusive power to make any law with respect to any matter
not enumerated in the Concurrent List or State List.
Residuary
powers of
legislation.
*
249. (1) Notwithstanding anything in the foregoing provisions of this Chapter, if the
Council of States has declared by resolution supp
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e Government of India but shall be
collected
(a) in the case where such duties are leviable within any Union territory, by the
Government of India, and
(b) in other cases, by the States within which such duties are respectively leviable.
*
268A. (1) Taxes on services shall be levied by the Government of India and such tax
shall be collected and appropriated by the Government of India and the States, in the manner
provided in clause (2).
(2) The proceeds in any financial year of any such tax levied in accordance with the
provisions of clause (1) shall be
(a) collected by the Government of India and the States;
(b) appropriated by the Government of India and the States,
in accordance with such principles of collection and appropriation as may be formulated by
Parliament by law.
269. (1) Taxes on the sale or purchase of goods and taxes on the consignment of
goods shall be levied and collected by the Government of India but shall be assigned and
shall be deemed to have bee
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-State trade or
commerce.
*
Taxes levied
and distributed
between the
Union and the
States.
Surcharge on
certain duties
and taxes for
purposes of
the Union.
270. (1) All taxes and duties referred to in the Union List, except the duties and taxes
referred to in articles 268, 268A and 269, respectively, surcharge on taxes and duties referred
to in article 271 and any cess levied for specific purposes under any law made by Parliament
shall be levied and collected by the Government of India and shall be distributed between the
Union and the States in the manner provided in clause (2).
271. Notwithstanding anything in articles 269 and 270. Parliament may at any time
increase any of the duties or taxes referred to in those articles by a surcharge for purposes
of the Union and the whole proceeds of any such surcharge shall form part of the
Consolidated Fund of India.
Restrictions as
to imposition
of tax on the
sale or
purchase of
goods.
286. (1) No law of a State sh
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TUTION
Power of
Parliament to
amend the
Constitution
and procedure
therefore.
368. (1) *
(2) An amendment of this Constitution may be initiated only by the introduction of a
Bill for the purpose in either House of Parliament, and when the Bill is passed in each
House by a majority of the total membership of that House and by a majority of not less
than two-thirds of the members of that House present and voting, it shall be presented to
the President who shall give his assent to the Bill and thereupon the Constitution shall
stand amended in accordance with the terms of the Bill:
Provided that if such amendment seeks to make any change in-
(a) article 54, article 55, article 73, article 162 or article 241, or
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(b) Chapter IV of Part V, Chapter V of Part VI, or Chapter I of Part XI, or
(c) any of the Lists in the Seventh Schedule, or
(d) the representation of States in Parliament, or
(e) the provisions of this article,
the amendment shall also require to be ratified
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