GST IN INDIA

India is a Union of States, having Constitutional fiscal autonomy, granted to each of the States and commonly known as Federal State. At the same time there is a Parliament governing Fiscal autonomy/system also, for the Country as a single unit.

Our Constitution provides distribution of taxing powers separately to the Central Government, as well as, to all the State Governments. For this purpose in the seventh Schedule, Three separate list such as, List I or Union List, List II or State List, and Concurrent List have been provided.

Parliament has the Domain over the Taxing power given in List I.

While State Assemblies have the Domain over the Taxing power, as provided in List II.

All the Central Direct and Indirect Taxes are being governed, controlled and administered by the Central Government while, All the State Indirect Taxes are being governed, controlled and administered by the State Governments.

By such constitutional proposition, there is a Parliamentary System/Domain for the purpose of Central Indirect Taxes as listed in List-I.

The Central Indirect Tax are being levied, charged and collected on All India basis, and there is no boarder barrier/limits across the States, for levy and charge of Central Indirect, and thus also granting or extending Input Tax Credit- even across the States as well.

Therefore for the purpose of Central Excise Duty and Service Tax, the Input Tax Credit facility is admissible to all the Manufacturing units, without any boarder barrier/limits of the States. In other words Central Excise or the Service Tax paid in any State, shall qualify for Input Tax Credit in any other State. Further Input Tax Credit facility, inter-alia among the Central Excise Duty and Service Tax is also admissible.

Whereas for the purpose of State VAT, Input Tax Credit facility is admissible to all the Selling/Manufacturing/Mining units, in course of sale, of such goods, within that respective State only.

Further, there is another, Central Indirect Tax for the purpose of Inter-State Sale of goods: commonly known as CST and is being governed by the CST Act 1956. Though it is Central Indirect Tax, but by the provisions, of our Constitution, as well as by the CST Act itself, the States are empowered to levy /charge and collect CST. Though it is a Central Tax, CST charged and collected, is assigned to that State revenue only, from where such inter-state sale of Goods has occasioned.

Though CST is a Central Indirect Tax: any CST Charged & collected , by any State: Input Tax Credit shall not be admissible to any other State.

A new provision: as Article 246A was inserted, that provides for levy tax on Goods and Services: by the Center and all the States, Union Territories. For this purpose, the GST Act was passed appropriately by the Parliament, as well as, by all the State Legislatures. And for this purpose: Appropriate amendments were made in Article 248, 249 and 250.

The existing for levy of tax on Inter State sales of goods, shall continue to be operative, with some appropriate amendments in its present form. (Article 269 and Entry 92A of List I of VIIth Schedule shall continue).

A new Article, as Article 269A was inserted, for the levy of Inter- State supply of Goods and Services. The revenue so accrued shall be apportioned, among the Center and all the states, by an agreed formula.

The present Article 286 was amended appropriately for determining the sale or supply of Goods and services are within the State or outside the State.

There was no change in the definition of “Sale”, as provided in Clause (29A) of Article 366.

However new entries in Article 366, was inserted to define the “Goods and Services Tax”, “Services” and the “State”. (Clause 12A, 26A and 26Bof Article 366)

The present entry 84 of List- I in the Union List, was substituted for levy of Excise Duty on petroleum goods such as Petrol, Diesel and ATF only. However Excise Duty shall continue to be levied, on Tobacco and Tobacco products.

The present Entry 54 of List- II of VIIth Schedule, was amended appropriately, to levy tax on sale of Petroleum products, Liquors, Natural Gas: inside the States.

A “GST Council” was constituted, on September 15, 2016 after the 122nd Amendments into the Constitution, by inserting a new Article 279A. It shall constitute of the members from the Center and the States as well.

The Union Finance minister is the Chairperson, Union Finance Minister of State, in charge revenue, and all the Finance and Taxation ministers, of all the States and Union Territories, are also the members. The State Finance ministers, shall elect any member of State as,” Vice Chairperson”.

The GST council shall also decide about the modalities, to resolve any dispute, arising out of the recommendation of GST council.

The Parliament, by law, as recommended for compensation to the states for any loss of revenue for a period not exceeding 5 years.

Goods & Services Tax Council is a constitutional body for making recommendations to the Union and State Government on issues related to Goods and Service Tax. The GST Council is chaired by the Union Finance Minister and other members are the Union State Minister of Revenue or Finance and Ministers in-charge of Finance or Taxation of all the States.

The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2016, for introduction of Goods and Services tax in the country was introduced in the Parliament and passed by Rajya Sabha on 3rd August, 2016 and by Lok Sabha on 8th August, 2016. Consequent upon this, the Hon’ble President of India accorded assent on 8th September, 2016, and the same was notified as the Constitution (One Hundred and First Amendment) Act, 2016. As per Article 279A (1) of the amended Constitution, the GST Council has to be constituted by the President within 60 days of the commencement of Article 279A. The notification for bringing into force Article 279A with effect from 12th September, 2016 was issued on 10thSeptember, 2016.

As per Article 279A of the amended Constitution, the GST Council which will be a joint forum of the Centre and the States, shall consist of the following members: -

1. the Union Finance Minister................................................................ Chairperson;
2. the Union Minister of State in charge of Revenue or Finance................. Member;
3. the Minister in charge of Finance or Taxation or any other
4. Minister nominated by each State Government...................................... Members.

As per Article 279A (4), the Council will make recommendations to the Union and the States on important issues related to GST, like the goods and services that may be subjected or exempted from GST, model GST Laws, principles that govern Place of Supply, threshold limits, GST rates including the floor rates with bands, special rates for raising additional resources during natural calamities/disasters, special provisions for certain States, etc.

The Union Cabinet in its meeting held on 12th September, 2016 approved setting-up of GST Council and setting up its Secretariat. The Cabinet inter alia took decisions for the following:

1. Creation of the GST Council as per Article 279A of the amended Constitution;
2. Creation of the GST Council Secretariat, with its office at New Delhi;
3. Appointment of the Secretary (Revenue) as the Ex-Officio Secretary to the GST Council;
4. Inclusion of the Chairperson, Central Board of Excise and Customs (CBEC), as a permanent invitee (non-voting) to all proceedings of the GST Council;
5. Create one post of Additional Secretary to the GST Council in the GST Council Secretariat (at the level of Additional Secretary to the Government of India), and four posts of Commissioner in the GST Council Secretariat (at the level of Joint Secretary to the Government of India).

The Cabinet also decided to provide for adequate funds for meeting the recurring and non-recurring expenses of the GST Council Secretariat, the entire cost for which shall be borne by the Central Government. The GST Council Secretariat shall be manned by officers taken on deputation from both the Central and State Governments.