the essay of 8 February 2023 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body> <p align="justify"><STRONG><FONT COLOR="#663399" SIZE="2" FACE="VERDANA, ARIAL, HELVETICA, SANS-SERIF">FEBRUARY 08, 2023</FONT></STRONG></p> <p align="center"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Can the Finance Bill propose to amend the GST Act? </strong></font></p> <p align="center"><u><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By Vijay Kumar </font></strong></u></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ONCE</STRONG> a very senior bureaucrat in the Central Health Ministry asked me, <em>"how does one go about bringing in a retrospective legislation?"</em> I told him, <em>"Simple, you go to Parliament and get the Act amended" </em>Then he told me that his Ministry has very few laws and they go to Parliament once in a decade or so and if they go with a new Bill, it will create havoc and will be discussed for days together. Then I told him to take the help of the Finance Ministry, they do it all the time. <em>"But can they make changes in an Act pertaining to the Health Ministry?"</em> I told him, they can. In fact, they do make amendments to several Acts in their Finance Bill.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But can they?</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Finance Bill, 2023 <em>inter alia </em> proposes to amend the -</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Central Goods and Services Tax Act, 2017; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Integrated Goods and Services Tax, 2017; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Government Savings Promotion Act, 1873; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Indian Stamp Act, 1899; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Securities Contracts (Regulation) Act, 1956; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. Central Sales Tax Act,1956; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. Prohibition of Benami Property Transactions Act, 1988; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002</font></p> </blockquote> <p align="justify"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Composite Bills containing taxation proposals and other matters are not Money Bills, and they can be brought under article 117.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On 6th August 1974, when the ‘Oil Industry (Development) Bill, 1974' was taken up for consideration in the Lok Sabha, some members (Madhu Limaye, Shyamnandan Mishra, Somnath Chatterjee, R. V. Bade and R.N. Mukerjee) raised points of order that the Bill combined provisions regarding the levy of excise duty, which was the basic idea, with those relating to the other matter, viz setting up of a Board for the development of the oil industry. In view of the objections raised by the members, the discussion on the Bill was postponed by the Speaker, Mr. G.S. Dhillon. On 19 August 1974, he observed:</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The main points raised are:</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Two proposals have been put forward in this Bill-one for setting up a board for the development of the oil industry and the other for levy of excise duty on crude oil produced in the country. Can two entirely different concepts be joined together as is done in this Bill? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. The Bill created a very strange situation. If the Speaker decides that It IS a Money Bill, the rights of Rajya Sabha would be restricted. On the other hand, if it is deemed to be a non-Money Bill, then it violates the exclusive right of Lok Sabha in matters relating to taxation. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. It appears from the Statement of Objects and Reasons of the Bill that the primary object of the Bill is to impose taxation in the garb of regulating and controlling the oil industry by setting up Development Board. Therefore, this is a Money Bill.</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And he gave his ruling</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">I am satisfied that this is not the first time that a Bill of this nature has been brought forward before the House. The precedents show that identical clauses relating to imposition of cess are contained in all the Bills which were introduced and passed earlier. As the present Bill follows the past precedents, I allow it to be proceeded with.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, since this Bill does not contain <strong>only </strong> provisions dealing with all or any of the matters specified in clause (1) of article 110 of the Constitution, I hold that it is not a Money Bill.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Article 117 covers cases where Bills can be brought before Parliament containing not only taxation proposals but also other matters. These Bills cannot be called Money Bills under Article 110. Therefore, there is no bar against any Bill of a composite or hybrid nature to be brought under Article 117.</font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#FFD7AE" span="span">However, I feel that it would be advisable that as far as possible Bills of composite or hybrid nature should be rare and only in cases where the proposed taxation and other matters connected therewith are inseparable.</font></p> </blockquote> <p align="justify"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">All Money Bills are Financial Bills. But all Financial Bills are not Money Bills.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On 15 May 1974, the Speaker, Mr. K.S. Hegde, ruled:</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Constitution uses three expressions - introduction of the Bill, consideration of the Bill and passing of the Bill. The Constitution uses these three independent expressions. Article 109 (1) merely prohibits stating that Money Bill simply shall not be introduced in the Council of States. The consideration and other aspects do not come. So, the introduction must be in this House. Both the Houses can consider the matter unless it is a Money Bill.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The essential question is: Is this a Money Bill or only a Financial Bill?</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">These are two different things. All Money Bills are Financial Bills. But all the Financial Bills are not Money Bills. So, if it is Money Bill, it cannot be there so far as Rajya Sabha is concerned. If it is a Financial Bill, different considerations arise.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The crucial question is: Is it a Money Bill or a Financial Bill?</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But the definition of Money Bill says that it must be, i.e. the entire thing must be a Money Bill not one clause alone. Article 110 says:</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(1) For the purposes of this Chapter, a Bill shall be deemed to be a Money Bill if it contains <strong>only </strong> provisions dealing with all or any of the following matters, namely:-</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) the imposition, abolition, remission, alteration or regulation of any tax; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) the regulation of the borrowing of money or the giving of any guarantee …… </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(c) the custody of the Consolidated Fund ... </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(d) the appropriation of money. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(e) the declaring of any expenditure ... </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(f) any matter incidental…..</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Bill must contain only these matters.</font></p> <p align="justify"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">A Finance Bill should not contain provisions intended to make permanent changes in the existing law unless they are consequential upon or incidental to the taxation proposals.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On 7 December 1956, during the discussion on the motions for consideration of the Finance (No.2) and the Finance (No.3) Bills, a member raised a point of order:</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">that the provisions of the Finance Bill were intended to make permanent changes in the existing law, and, if enacted, would have far reaching effects. The proper thing was to adopt those provisions by a separate amendment Act and not to rush them through in a Finance Bill.</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In support of the points of order, he drew attention to an earlier observation made by the Speaker on 21 April 1956, during the discussion of the Finance Bill, 1956. The Speaker had then observed:</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A Finance Bill is intended to raise taxes which would subsist only for the year. Other provisions relating to Statutes, which are of a more permanent character, ought not to be clubbed with the Finance Bill but discussed in a more leisurely manner. Discretion will be exercised by the hon'ble Finance Minister or his Ministry in bringing them separately unless they are so interconnected with the other provisions of the Bill, that the finances for any particular year depend upon those provisions. In such cases they can be added on here.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" span="span" style="background-color:#F3DBCF">It is not so much a question of legality as a question of propriety .</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Dismissing the point of order, the Speaker Mr. G.V. Mavalankar ruled:</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Two views have been pressed before the House. One is that it is a Finance Bill and for every Finance Bill there is a particular procedure laid down both in the Constitution and under the Rules, and that must be followed. After the Demands for Grants are voted by the House and the House is satisfied that so much money is necessary, provision must be made by way of taxation, from year to year. That is the object of the Finance Bill.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">... Last year, it is true that I said-and I still stick to that view that in a Finance Bill, only provisions relating to the taxation measures to meet the expenditure that has been voted upon by the House ought to be there. Otherwise, there is no meaning in a Finance Bill. During that discussion opportunity is taken to review the whole administration, whether it has been working right or wrong, whether the funds voted have been handled properly, with respect to the expenditure, whether a year is lean or fat and all that. All these should be taken into account.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">I would normally urge upon the Finance Minister, not only he but also all his successors, to see to it that only those provisions which relate to the raising of taxation should be included in the Bill. The procedure should be followed and no other provisions should be given attention to unless they are absolutely consequential. If we have to provide by way of an amendment to the Income-tax Act or by way of an amendment to a substantial Act, Government must come forward with an independent measure separately, and the House will have ample opportunity to consider it. But in a Finance Bill those things ought not to be normally included.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">I would urge upon the hon'ble Minister to see that the House should bestow sufficient attention upon all these matters and there ought not to be any impression in any quarter that without knowledge of the full import of the discussion of anything was brought in this House. That ought to be avoided, at any cost wherever it can be avoided.</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is not as if the Government is not aware of this requirement. In the latest Budget Manual released by the Finance Ministry in November 2022, it is mentioned in para 2.10.3:</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Speaker has held that the Finance Bill should not contain amendments to both direct and indirect tax laws if they are of a permanent nature and are not consequential upon or incidental to the taxation proposals, and for that, a separate Bill i.e. <em>Taxation Laws Amendment Bill </em> should be brought forward.</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The first <em>Taxation Laws (Amendment) Bill </em> was introduced in 1962 and the latest in 2021, but still amendments not connected with the taxation for that year sneak into the Finance Bill, as for example, the 2023 Finance Bill seeks to amend the Government Savings Promotion Act, 1873! How does it justify its place in the Finance Bill?</font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Next week</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is recommended that you read last week's column <a href="https://taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=44834" target="_blank"><strong>KYB - Know Your Budget </strong></a></font></p> </body> </html>