Goods and Services Tax – GST – By: – Mr. M. GOVINDARAJAN – Dated:- 9-10-2018 – GST laws The Central Government introduced a major tax reforms in indirect tax laws. The existing indirect laws except customs levied by the Central Government and State Governments are subsumed into one tax viz., Goods and Services Tax. The Central Government, for this purpose, amended the Constitution providing for subsuming of various indirect taxes and Central and States surcharges and cesses so far as they relate to supply of goods and services both on interstate and Intra State. Section 18 of the Amendment Act enabled the Parliament to levy a cess for five years to compensate the States for the loss of revenue on account of GST. The Central Government enacted the following Acts for the purpose of GST- Central Goods and Services Tax Act, 2017; Integrated Goods and Services Tax Act, 2017; Union Goods and Services Tax Act, 2017; Goods and Services Tax (Compensation to States) Act, 2017. To enforce the pr
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ases coal from Indian mines. The Finance Act, 2010 with effect from 01.07.2010 levied Clean Energy Cess which was in the nature of a duty of excise on the production of coal and was being collected at the time of removal of raw coal, raw lignite and raw peat from the mine to the factory. On the introduction of GST laws the law relating to Clean Energy Cess was repealed. The writ petitioner submitted a representation to the GST Council seeking set off of Clean Energy Cess against GST Compensation Cess. The writ petitioner filed a writ petition before the Delhi High Court. The Division Bench of the Delhi High Court passed an interim order on 25.08.2017. In the interim order dated 25.08.2017, the Division Bench observed that there is a prima facie case made out by the writ petitioner regarding lack of legislative competence of Parliament to enact Compensation to States Act, 2017. The High Court observed that cess is being levied on the same taxable event that is the subject matter of the
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lacks legislative competence. Section 18 of the Constitution (One Hundred and First Amendment) Act, 2016 does not empower the Parliament to levy cess and tax as it provides Parliament to make any law to provide compensation to the States for loss of revenue arising on account of implementation of GST for a period of 5 years. On the very same transaction there cannot be two levies, one under Central GST Act and another under impugned legislation as it would amount to double taxation as levied on the same taxable event and same subject. The writ petitioner has to pay clean energy cess as well as compensation cess which amounts to double taxation. The petitioner may be permitted to set off the cess of ₹ 7.68 crores which was already paid on the stock lying with the petitioner on 30.06.2017. The Revenue submitted the following before the Supreme Court- Cess is nothing but a special kind of tax. If the legislature is competent to levy the main tax, i.e. GST under Article 246A of the C
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ues- Whether the Compensation to States Act, 2017 is beyond the legislative competence of Parliament? Whether Compensation to States Act, 2017 violates the Constitution (One Hundred and First Amendment) Act, 2016 and is against the objective of Constitution (One Hundred and First Amendment) Act, 2016? Whether the Compensation to States Act, 2017 is a colorable legislation? Whether levy of Compensation to States Cess and GST on the same taxing event is permissible in law? Whether on the basis of Clean Energy Cess paid by the petitioner till 30th June, 2017, the petitioner is entitled for set off in payment of Compensation to States Cess? First issue In respect of the first issue the Supreme Court analyzed the provisions of Constitution in regard to levy of tax and the introduction of Constitution amendment Act and the objects for the introduction of GST. One of the objects is to provide compensation to the States for loss of revenue arising on account of implementation of the Goods and
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Parliament. No contention has been raised before the Supreme Court that the subject matter of legislation was within the competence of State Legislature, and that the Parliament had no competence to legislate. The Supreme Court did not find do not find any lack of legislative competence in the Parliament. The Supreme Court held that- after Constitution (One Hundred and First Amendment) Act, 2016, as per Article 270, Parliament can levy cess for a specific purpose under a law made by it; Article 270, thus, specifically empowers Parliament to levy any cess by law; section 18 of the Constitution (One Hundred and First Amendment) Act, 2016 expressly empowers Parliament shall, by law on the recommendation of the Goods and Services Tax Council, provide for compensation to the states for loss of revenue arising on account of implementation of the goods and services tax…. The Supreme Court did not find any merit in the submission of the learned counsel for the petitioner that Parliament
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ral entry rather it specifically relates to goods and services tax. When express power is there to make law regarding goods and services tax, the Supreme Court failed to comprehend that how such power shall not include power to levy cess on goods and services tax. Constitution (One Hundred and First Amendment) Act, 2016 was passed to subsume various taxes, surcharges and cesses into one tax but the constitutional provision does not indicate that henceforth no surcharge or cess shall be levied. The Supreme Court held that power of Parliament to make law providing for compensation to the States for loss of revenue was expressly included by constitutional provision. The Preamble of Compensation to States Act, 2017 expressly mentions the Act to provide for compensation to the States for the loss of revenue arising on account of implementation of the goods and services Tax in pursuance of the provisions of the Constitution (One Hundred and First Amendment) Act, 2016. Thus, the Compensation
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nd services tax being already imposed by three enactments of 2017 as noticed above imposition of States Compensation Cess is levied on the same taxing event and has overlapping effect which is not permissible. The Supreme Court held that it is well settled that two taxes/imposts which are separate and distinct imposts and on two different aspects of a transaction are permissible as in law there is no overlapping . There might be overlapping but the overlapping must be in law. The fact that there is an overlapping does not detract from the distinctiveness of the aspects. Therefore, if the taxes are separate and distinct imposts and levied on the different aspects, then there is no overlapping in law. Goods and Services Tax imposed under the 2017 Acts and levy of cess on such intrastate supply of goods and services or both as provided under Section 9 of the CGST Act and such supply of goods and services or both as part of Section 5 of IGST Act is, thus, two separate imposts in law and ar
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