ISSUE OF ADDITIONAL (ENTRY TAX) IN PROPOSED GST
By: – Dr. Sanjiv Agarwal
Goods and Services Tax – GST
Dated:- 19-12-2015
Additional tax is an additional tax levy whereby states will be allowed to collect tax of one percent over and above the normal GST for the goods that enter the state. This is imposable for a maximum period of two years.
The Constitutional Amendment Bill on GST provided that 'An additional tax on the supply of goods, not exceeding one per cent, in the course of inter-state trade or commerce shall 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.'
Manufacturing states such as Maharashtra and Gujar
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scading effect on the supply chain.
Manufacturing states claim that GST may result in major revenue loss as GST follows a destination based consumption tax model. Hence, a transitory provision has been made under proposed section 18(1) of Constitution (122nd Amendment) Bill, 2014 for levy of 1% additional tax on supply of goods (ATSG) in the course of inter-state trade or commerce.
The 1% tax will increase cost of inter-state job work of goods. The 1% tax will increase cost of inter-state transactions and hence, to that extent, will discourage inter-state movement of goods. Thus, it will be hindrance to inter-state movement of goods. It is yet to be seen whether 1% additional tax will be imposed only at the initial movement from originati
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l tax will not form part of consolidated fund of India. It will be assigned to States from where supply of goods originates. For this purpose, 'State' will include 'Union territory with legislature'- proposed Article 366 (26B) of Constitution of India. 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 – proposed section 18(4) of Constitution (one Hundred and Twenty Second Amendment) Bill, 2014.
There is similar provision in respect of Central Sales Tax in Article 269(1) of Constitution of India.
However, Committee headed by Chief Economic Advisor on GST rates has recommended that additional tax may not be
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