GST - Constitutionally
I am one of those incorrigible optimists who believed that GST will not come in the next five years, but now my hopes seem to have been dashed. GST appears to have crossed the horizon into the realm of reality.
The Constitutional Amendment Bill was passed by Lok Sabha on the 6th May, 2015 and transmitted to Rajya Sabha for concurrence. Rajya Sabha passed the Bill with amendments at its sitting held on the 3rd August, 2016 and returned it to Lok Sabha on 4th August, 2016. And the Lok Sabha approved the amendments yesterday.
What does the Constitution amendment propose to achieve?
1. A new Article 246A is added to the Constitution which stipulates that notwithstanding anything contained in articles 246 and 254, Parliament, and, the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State. Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. Article 246 deals with the powers of the Centre and the States to make laws as per the Union List, the State List and the Concurrent List. Article 254 deals with the supremacy of the laws made by Parliament.
2. A new Article 246A is added to the Constitution which stipulates that Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States and that such apportioned amounts shall not be part of the Consolidated Fund of India or the States. This is said to be for ease of transfer of funds.
3. Article 270 is amended to provide for distribution of the GST collected by the Central Government between the Centre and the States.
4. As per Article 271 surcharge on taxes is not shareable and remains with the Centre. Now this article is amended to exclude GST from its purview.
5. A new Article 279A is added for constitution of the GST Council.
6. Article 366 is amended to define "goods and services tax" as any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption; and to define services as anything other than goods.
7. Seventh Schedule is amended to substitute entry 84 in Union List dealing with excise duty. Now excise duty can be levied on petroleum crude;
(a) petroleum crude
(b) high speed diesel;
(c) motor spirit (commonly known as petrol);
(d) natural gas;
(e) aviation turbine fuel; and
(f) tobacco and tobacco products
Service tax is omitted;
From the State list, sales tax, entry tax and entertainment tax omitted.
8. States to be compensated for loss of revenue due to implementation of GST, for a period of five years.