The GST Circus Trapeze - Where is the Catch? - Excise Out - GST not In?
trapez.jpg — the image was hosted by the publisher and was not captured.THE very mention of GST makes the social media tipsy with too many experts giving too many opinions - mostly wrong. The Government should be aware of this trending tweets and posts and should realize that any faltering movement will be closely watched, analysed and publicized and become topics of hot discussion right across the country even before you finish saying GST. I spent the whole of Saturday and Sunday calling up experts in the field and getting their concerned opinion. Though it is well known as to what happened, a little recap might be in order.
The Constitution (One Hundred and First Amendment) Act, 2016 received the assent of the President on 8th September 2016. The Act consists of 20 Sections which briefly are:
1. The Act to come into force on a date to be notified by the Government. Different Sections can be notified from different dates.
2. New Article 246A inserted in the Constitution - Parliament and State Legislatures given power to make laws with respect to GST
3. Article 248 amended to include Article 246A.
4. Article 249 amended to include Article 246A.
5. Article 250 amended to include Article 246A.
6. Article 268 amended to delete "and such duties of excise on medicinal and toilet preparations"
7. Article 268A (service tax - not notified) omitted
8. Article 269 amended to include Article 269A.
9. Article 269A inserted - GST on inter-State trade or commerce.
10. Article 270 amended to make consequential changes.
11. Article 271 amended to make consequential changes.
12. Article 279A inserted - GST Council.
13. Article 286 amended to make consequential changes.
14. Article 366 amended - GST, services and State defined.
15. Article 368 amended to make consequential changes.
16. Sixth Schedule amended - power to levy taxes on entertainment and amusements - by certain authorities.
17. Seventh Schedule amended:
a. Entry 84 (List I) - excise duty amended to restrict excise duty to certain products like petroleum crude, HSD…
b. entries 92 (List I) (Taxes on the sale or purchase of newspapers and on advertisements) and 92C (service tax) omitted
c. Entry 52 (entry tax) in List II omitted.
d. Entry 54 (tax on sale and purchase of goods) in List II amended.
e. Entry 55 (tax on advertisements) in List II omitted.
f. Entry 62 (Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling) in List II amended.
18. Compensation to States for loss of revenue on account of introduction of GST.
19. Transitional Provisions: State Laws to be validly in force till maximum one year.
20. Power of President to remove difficulties.
The Act was to come into force from a date to be appointed by the Government. The Government could fix different dates for different provisions. So, the Government notified Section 12 (GST Council) to be effective from 12th September 2016.
The remaining Sections were notified to be effective from 16th September. This 16th September Notification triggered the panic button and set the social media on fire. The daunting question was:
Are Excise Duty, Service Tax and VAT abolished without GST actually coming in?
A little more basic explanation.
As per Article 246 of the Constitution:
1. Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (referred to as the "Union List").
2. The State Legislature has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (referred to as the "State List").
3. Parliament, and the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (referred to as the "Concurrent List").
As per the new amendment, Article 246A empowers the Parliament and State Legislatures to make Laws with respect to GST.
In the Seventh Schedule, List I has 97 entries, in which entry 84 which empowered the Parliament to make laws for duties of excise, now allows excise duty only on certain commodities like Petroleum Crude. So, there seems to be no provision for imposing excise duty. But entry 97 is Any other matter not enumerated in List II or List III including any tax not mentioned in either of those Lists. Can excise duty be now collected under the residuary entry 97? Service Tax was being collected and will continue to be collected under this entry 97.
Similarly, VAT was collected under entry 54 of List II. Now as per the amended provisions, VAT can be collected only on certain products like Petroleum Crude, HSD etc which are at present outside the purview of GST.So, what will happen to VAT now? Is there no authority to levy VAT?
This is how I ended up spending Saturday and Sunday calling up the experts. I spoke to a large number of Revenue Officers - serving and retired; senior and junior, and several leading tax consultants and advocates right across the country. Many Revenue Officers were sure that the Government has goofed up and they gleefully told me, "you often criticize the IRS, now see what the mess the IAS has landed us in." The IAS officers I tried to contact were wisely not available. The lawyers tried to find ways out and feebly defended the Government. In the meantime, we were flooded with frantic calls and messages from our Netizens wanting to know if India is declared a "No Tax Country".
The problem doesn't seem to be all that serious, though the situation could have been better handled and the Revenue Secretary or some senior functionary associated with GST should have been available to clarify doubts and do some damage control.
VAT is saved by the transitional provisions under Section 19 of the Constitution (One Hundred and First Amendment) Act, 2016. Under this provision, the VAT laws are valid till they are repealed or till one year from the commencement of the Constitution (One Hundred and First Amendment) Act, 2016, whichever is earlier. So, the States have a maximum time till September 15 2017 to join the GST bandwagon.
Service Tax is any way levied under the powers of entry 97 of List I and will continue to be so.
Excise Duty can also be levied under the residuary entry 97. If Service Tax can be levied under entry 97, why not excise?
But all shades of opinion are floating around on these issues and the Government will come out with some sort of clarification today.
The Revenue Secretary has tweeted, "Some questions are raised about the notifications issued recently in respect of GST constitutional amendment. We will be clarifying the correct legal position tomorrow and we will issue amendments if the need be."
But one thing is certain - GST has to come into force all over India before 15th September 2017.