WHAT IS THE NEED FOR CONSTITUTIONAL AMENDMENT FOR IMPLEMENTATION OF GST?

GST Update 04.01.2016

GST DAILY DOSE OF UPDATION:-

WHAT IS THE NEED FOR CONSTITUTIONAL AMENDMENT FOR IMPLEMENTATION OF GST?

It is being reported that the major hurdle in bringing the new revolutionary taxation reform GST in India is the constitutional amendment that is being delayed for passage in the Parliament. The constitutional amendment is the backbone for triggering the implementation of GST reform in India. The reason being that our Country is a form of federal structure wherein certain powers have been specified for both Centre and States. Even our Constitution provides for delineation of powers to tax between Centre and States.

Article 246 of the Indian Constitution distributes legislative powers including taxation between the Parliament of India and the State Legislature. Schedule VII enumerates these subject matters by way of three lists:-

·        List I (known as Union List) entailing the areas on which only the Parliament/Centre is competent to make laws.
·        List II (known as State List) entailing the areas on which only the State legislature is competent to make laws.
·        List III (known as Concurrent List) listing the areas on which both the Parliament and the State Legislature can make laws upon concurrently.

In India, while the Centre Government is empowered to tax services and goods upto the production stage and import/export of goods and services, the States have power to tax sale of goods. 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. Thus, the Constitution does not vest express power either in the Central or State Government to levy a tax on the ‘supply of goods and services’. Moreover, the Constitution also does not empower the States to impose tax on imports. As the proposed unified taxation GST entails to impose a unified tax on goods and services both, therefore, it is essential 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.

Consequently, The Constitution (One Hundred And Twenty Second Amendment) Bill, 2014 is pending approval wherein it is proposed to insert a new Article 246A which starts with Non-obstante clause and provides that the legislature of every State have power to make laws with respect to goods and services tax imposed by the Union or by such State. Furthermore, it is also proposed by way of Proviso to this Article that Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of Inter-State trade or commerce. The approval of this constitutional amendment is a must and a pre-requisite for implementing GST in India. We can say this is the first step towards introduction of GST in India which is not yet been taken and completed till date.

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GST Update 04.01.2016

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