Definition of Government

GST Update 14.07.2016

GST DAILY DOSE OF UPDATION:-

Definition of Government:-

Levying and collecting the tax from “Government” by the “Government” is like taking the money out from one pocket and keeping it in another pocket. However, in order to maintain the healthy and unbiased competition in the market, even the government is liable to pay the tax in many cases. At the same time, the government enjoys a lot of privileges in a statute. However, in order to clearly bring out the role of the ‘government’ in a taxing statute, the first and foremost thing is to define this term.

The proposed section 49 of draft GST Act, the term government reads as follows:-

“(49) “government” means Central Government and its departments, a State Government and its departments and a Union territory and its departments, but shall not include any entity, whether created by a statute or otherwise, the accounts of which are not required to be kept in accordance with Article 150 of the Constitution or the rules made thereunder;”

This definition has been taken from the existing definition given in the Service tax law. This term seeks to cover both types of governments namely Central & State as well as a Union Territory including their departments. However, any entity whether created by statute or otherwise will not be covered unless its accounts are to be kept in accordance with article 150 of the Constitution. This article empowers the President to prescribe the form of accounts (on advice of Comptroller and Auditor General) in which the records of various government departments are to be kept. Thus, various entities created under any law which are not required to keep their accounts in the form prescribed under this article shall not be covered by the definition of government.

It is worthwhile to mention here that when the service tax law took the paradigm shift from positive list to negative list regime in year 2012, various exemptions were allowed to the “Government”. However, this term was not defined in the service tax law, and thus, it was taken from General Clauses Act, 1897. As per General Clauses Act, 1897; the term government includes both Central and State Government and State includes Union Territory. Later on, Budget 2015 brought the definition of this term in the service tax law to make it more precise. This definition as applicable w.e.f. 14.05.2015 is the same definition which has been proposed in the draft GST Act and as discussed in the forgoing para.

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GST Update 14.07.2016

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