WHY AMENDMENT IN CONSTITUTION WAS MADE TO CLEAR THE WAY TO ENACT GOODS AND SERVICE TAX (GST)

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WHY AMENDMENT IN CONSTITUTION WAS MADE TO CLEAR THE WAY TO ENACT GOODS AND SERVICE TAX (GST)

 

Someone asked  me that how amendment in the constitution will pave the way for the roll out of Goods and Services Tax (GST) in India. Why our parliament cannot passed the GST Bill right away like Companies Act 2013?.  I tried best to explain this in this article.

 A constitution is supreme law by which a country is governed. It is the base and source of powers to legislate all laws. All the authority to legislate comes from constitution.  According to the Constitution of India, the government has the right to levy taxes on individuals and organizations. However, the constitution states that no one has the right to levy or charge taxes except the authority of law. Whatever tax is being charged has to be backed by the law passed by the legislature or the parliament. Any tax levied by the government which is not backed by law or is beyond the powers of the legislating authority may be struck  down  as unconstitutional.

 The Constitution of India is federal  in nature but unitary  in spirit. The Federal system means division of power between Centre and States. Our constitution being federal divides all powers (Legislative Powers, Financial and Executive) between Centre and States except judicial powers. Article 246 (SEVENTH SCHEDULE) of the Indian Constitution, distributes legislative powers including taxation, between the Parliament and the State Legislature under three lists. i.e (1) UNION LIST: Areas on which only the parliament is competent to makes laws (2). STATE LIST: areas on which only the state legislature can make laws, and (3) CONCURRENT LIST: Listing the areas on which both the Parliament and the State Legislature can make laws upon concurrently.

 As per these lists the Centre is empowered to tax on import export of products i.e custom and Excise duties whereas State Cannot. Whereas State can charge and collect tax on entry of goods into a local area and tax on sale or purchase of goods i.e. VAT. The States do not have the powers to levy a tax on supply of services while the Centre does not have power to levy tax on the sale of goods. There are 13 heads under Union List on which only Central can legislate tax laws and  State list contain 19 heads on which which State Legislative enacts the taxation law.

 Therefore, it was necessary to have Constitutional Amendments for empowering the Centre to levy tax on sale of goods and States for levy of service tax and tax on imports and other consequential issues to amend the provisions which are inconsistent with Goods and Service Tax (GST )Law.

 Therefore The Constitution (122nd Amendment) Bill, 2014’ placed and passed on 3rd August 2016 by ‘Rajya Sabha’ and subsequently  was further unanimously passed by the ‘Lok  Sabha’ by approving all the amendments.

 The bill has got ratification from required 16 states and our President Sh. Pranabh Mukherjee has given his assent to the Goods and Services Tax (GST) Bill, on 8th September 2016.

 On 12th September 2016, the Cabinet has cleared the process, formation and functioning of the ,GST Council  which will decide on the rate of tax under the new indirect taxation regime. As per the news  ‘Central Board of Excise and Customs’ (CBEC) to be renamed as ‘Central Board of Indirect Tax (CBIT).

 

 

Thanks & Regards:
KASHIF ALI & ASSOCIATES
Company Secretaries
268, Business India Complex,
Uday Park, New Delhi-110049
Call us : +91 9718483209


 

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