GST Update on differential strategy adopted for providing compliance relaxations for erstwhile indirect tax laws vis a vis GST Laws in Ordinance, 2020 49/2020-21

Due to pandemic situation prevailing in many countries of the world including India causing immense loss to the lives of the people, it became imperative to relax certain provisions including extension of various time limits for compliances in taxation laws. Consequently, “The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020” was passed on 31^st March, 2020. The present update seeks to discuss about the meaning of Ordinance and the various requirements for its effective implementation and the discussion as regards the Ordinance, 2020.
Before proceeding to discuss the contents of Ordinance, 2020, it is appropriate to have basic overview about the Ordinance under Indian Constitution. Article 123 of the Indian Constitution provides power to President to promulgate Ordinances during the recess of the Parliament. Similar power is vested to the Governor under Article 213 of the Indian Constitution. As the Ordinance, 2020 is passed by the President, we restrict our discussion to Article 123 of the Indian Constitution. The general meaning of “Ordinance” is it is a decree or law promulgated by a State or national government without the consent of the legislature. However, ordinance cannot be in conflict with any higher law or constitutional provisions.

Article 123 of the Constitution of India grants the President certain law-making powers to promulgate ordinances when either of the two Houses of Parliament is not in session. Hence, it is not possible for the ordinances to be issued in the Parliament. The fundamental reason for bestowing the executive with the power to issue ordinance was to deal with situations where an emergency in the country necessitated urgent action.
An ordinance may be concerned with any subject that the Parliament has the power to legislate on and also has the same limitations as the Parliament to legislate according to the distribution of powers between the Union, State and Concurrent Lists.There are three limitations with regard to the ordinance making power of the executive. They are:

i. The President can only promulgate an ordinance when either of the two Houses of Parliament is not in session.

ii. The President cannot promulgate an ordinance unless he is satisfied that there are circumstances that require taking ‘immediate action’.

iii. Ordinances must be approved by Parliament within six weeks of reassembling or they shall cease to operate. They will also cease to operate in case resolutions disapproving the ordinance are passed by both the Houses.

An ordinance has to be converted into legislation within 42 days of commencement of the Parliament session, or else it will lapse. An ordinance can be re-promulgated only thrice. The governor of a state can also issue ordinances under Article 213 of the Constitution of India, when the state legislative assembly is not in session. An ordinance is described as a legislative power of the President; however, it is issued on the advice of the council of ministers and is hence considered to be a law made by the executive. Ordinances are to be issued in extra-ordinary situation and if they are issued otherwise in regular course, they violates the spirit of the Constitution. As the emergency situation is prevailing in the Country, Ordinance has been issued.

Now, we discuss about the contents of the Ordinance passed recently by the government giving relaxations in the compliances under taxation laws. If we observe the provisions of the Ordinance with respect to relaxations under indirect taxation laws, we find that they are bifurcated into two categories. The relaxations with respect to time limits under the Central Excise Act 1944, Customs Act 1962, Customs Tariff Act, 1972 and the Finance Act 1994 pertaining to Service Tax Laws has been implemented by way of ordinance itself and no separate notification has been issued. However, the relaxations with respect to compliances under GST laws has been granted by inserting new section 168A in the CGST Act, 2017 thereby giving the powers to the government to extend the time limit in special circumstances. Now, the moot question that arises is why differential practise has been followed as regards relaxations provided to the GST Laws vis a vis erstwhile indirect taxation laws? Well, the answer to this question lies in the highlighted portion stating that Ordinance is to be passed according to the distribution of powers of legislation as stated in Union, State and Concurrent Lists. GST is being levied according to provisions contained in Article 246A which empowers both Central Government and State Government to jointly levy tax on supply of goods and services called “GST” with the condition that Parliament/Central Government has exclusive power to make laws with respect to inter‑state supply of goods or services. Consequently, as the Ordinance is being passed by the Hon’ble President in exercise of powers contained in Article 123(1) of the Constitution, the ordinance could provide compliance relaxations only with respect to Central Goods and Services Tax. The relaxations with respect to State Goods and Services Tax needs to be provided by respective State Governments. Consequently, new section 168A was inserted in CGST Act, 2017 to provide power to the government with the recommendations of the GST Council to extend time limit for various compliances in special circumstances. Therefore, separate notifications providing various relaxations have been issued under Central Tax and simultaneously similar relaxations have been issued by the State Governments. For example, the government of Gujarat has issued various notifications in line with Central Tax Notifications issued by CBIC which can be accessed on their website commercialtax.gujarat.gov.in. However, it is pertinent to mention that there are many State Governments that have not issued similar notifications providing such relaxations which is a cause of concern for the assessees of the respective States.

Therefore, the differential strategy of providing relaxations during the pandemic situation with respect to GST Laws by way of issuance of notifications and not by the ordinance itself is mainly on account of the simultaneous power of the Central Government and the State Government to levy GST on supply of goods or services.

This is solely for educational purpose.
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GST Update on differential strategy adopted for providing compliance relaxations for erstwhile indirect tax laws vis a vis GST Laws in Ordinance, 2020 49/2020-21

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