Omar Bennett
The Goods and Services Tax (GST) in India was implemented following the passing of the Constitutional (122nd Amendment) Bill in 2016. The Bill was passed by the Rajya Sabha on 3rd August 2016 and by the Lok Sabha on 8th August 2016. The Bill was then ratified by more than 15 states, receiving assent from President Pranab Mukherjee on 8th September 2016. The GST Council, a constitutional body comprising members from the Centre and States, was formed to address issues related to GST implementation, such as tax rates, exemptions, and administrative procedures. The GST regime in India has resulted in the subsumption of multiple taxes, aiming to create a harmonised system of taxation and a seamless national market.
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What You'll Learn
The GST Council
Some important decisions taken by the GST Council include the introduction of the new e-way bill mechanism to encourage self-reporting businesses, the approval of the e-invoicing system, and the reduction of tax rates for the real estate sector. The GST Council has also recommended amendments to various GST Acts and Rules, such as the CGST Act and CGST Rules, to provide legal frameworks and simplify policies. It has also approved trade facilitation measures, such as changes in refund calculation formulas and the waiver of late fees.
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Amendments to Articles 246A and 269A
The introduction of the Goods and Services Tax (GST) in India required amendments to the Indian Constitution, including changes to Articles 246A and 269A. These amendments were part of the Constitutional (122nd Amendment) Bill, also known as the Constitution Amendment Bill or CAB, which was passed by the Lok Sabha in May 2015 and by the Rajya Sabha on 3rd August 2016.
Article 246A gives the Parliament exclusive power to make laws regarding inter-state supplies and taxes on goods and services imposed by the Union or State. It also covers the manner of distributing revenue from such supplies between the Centre and the State, with the GST Council authorised to frame rules in this regard. The import of goods or services is considered inter-state supplies, allowing the Central Government to levy IGST on import transactions.
Article 269A is related to the distribution of taxes collected by the Union under Article 246A. It outlines that when the amount collected as tax by a State under Article 246A is used to pay the tax levied under clause (1) of the same article, that amount is excluded from the Consolidated Fund of the State. Additionally, Parliament is authorised to establish principles for determining the place of supply and when a supply of goods or services occurs in inter-state trade or commerce.
The amendments to Articles 246A and 269A were necessary to delineate the powers of the Centre and States in levying and making laws related to GST, ensuring consistent legislation across India.
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Changes to tax on goods and services
The introduction of the Goods and Services Tax (GST) in India required an amendment to the Constitution, as the Constitution contains the Union List and the State List, which gives the power to levy separate taxes to the Centre and States respectively. The GST was to be levied in a way that gave power to both the Centre and the States to levy and collect it. This required the insertion, deletion, and amendment of certain Articles of the Constitution.
The Constitutional (122nd Amendment) Bill, 2014 was introduced in the Parliament to enable the introduction of GST. The Bill was passed by the Lok Sabha in May 2015 and by the Rajya Sabha on 3rd August 2016, and then again by the Lok Sabha on 8th August 2016 with certain amendments. The Bill was passed by more than 15 states and received the President's assent on 8th September 2016. This was enacted as the 101st Constitution Amendment Act, 2016, which conferred simultaneous power upon Parliament and the State Legislatures to make laws governing goods and services tax and the creation of the Goods and Services Tax Council.
The GST Council is a joint forum of the Centre and the States, responsible for making recommendations on issues related to the implementation of the GST in India. The Council consists of various members, including the Minister In-charge of finance or taxation or any other Minister nominated by each State Government. The GST Council takes decisions through a consensus-based approach, with each decision requiring a majority of not less than three-fourths of the weighted votes of the members present and voting. The Council has been instrumental in deciding key issues related to GST, such as tax rates, exemptions, thresholds, and administrative procedures.
The GST regime has laid the foundation for a seamless national market, reshaping India's tax landscape and driving economic growth. The GST Council has demonstrated flexibility in responding to challenges by frequently reviewing and amending policies. For example, the Council has recommended certain trade facilitation measures, such as changes in the formula for calculating refunds and additional modes for payment of tax. The Council has also recommended the amendment of certain Acts and Rules to provide a legal framework for the functionality of the Invoice Management System (IMS).
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The role of the President
The implementation of the Goods and Services Tax (GST) in India required an amendment to the Constitution. This was done through the Constitutional (122nd Amendment) Bill, 2014, which was passed by the Lok Sabha in May 2015 and by the Rajya Sabha on 3rd August 2016. The Bill was then passed by more than 15 states and received the assent of the President on 8th September 2016, becoming the 101st Constitution Amendment Act, 2016.
The President of India has a significant role in the legislative process and is assigned veto powers by the Constitution. The President can exercise three types of veto: absolute veto, suspensive veto, and pocket veto. An absolute veto allows the President to refuse to give assent to a bill, effectively rejecting it. A suspensive veto is when the President returns a bill (except Money Bills) to Parliament for reconsideration. If the bill is passed again, the President must give assent. A pocket veto refers to the President's power to neither ratify nor reject nor return a bill but simply keep it pending indefinitely.
In the context of the GST Amendment Bill, the President's role was to give assent to the Bill once it was passed by both Houses of Parliament (Lok Sabha and Rajya Sabha) and by more than 15 states. As per Article 279A(1) of the amended Constitution, the President was also responsible for constituting the GST Council within 60 days of the commencement of the Constitution (One Hundred and First) Amendment Act, 2016. The GST Council is a joint forum of the Centre and the States, responsible for making recommendations on issues related to the implementation of GST in India.
The President's veto power serves as a check on the legislative process, allowing for thorough scrutiny and debate on proposed legislation. It ensures that laws passed by Parliament align with principles of justice, equity, and the rule of law. In the case of the GST Amendment Bill, the President's assent was necessary to confer simultaneous power upon Parliament and the State Legislatures to make laws governing goods and services tax.
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The impact on inter-state trade
The implementation of the Goods and Services Tax (GST) in India was enabled by the Constitutional (122nd Amendment) Bill, also known as the Constitution Amendment Bill, which was passed in 2016. This bill conferred simultaneous power upon the Parliament and State Legislatures to make laws governing GST and led to the creation of the GST Council.
The GST Council is a joint forum of the Centre and the States, responsible for making recommendations and decisions on issues related to the implementation of GST. It consists of members such as the Minister In-charge of finance or taxation from each State Government. The Council has played a crucial role in deciding key aspects of GST, including tax rates, exemptions, thresholds, and administrative procedures.
Prior to the introduction of GST, India operated under a complex system of indirect taxes, such as Excise Duty, Service Tax, VAT, and Central Sales Tax, which were administered separately by the Central and state governments. This resulted in a complicated web of cascading taxes, where businesses conducting interstate sales faced multiple tax obligations, creating a substantial tax burden.
The impact of GST on inter-state trade has been significant. The transition to a unified framework has streamlined compliance procedures and reduced the administrative burden on businesses. With GST, traders experience seamlessness in domestic and international trade, as the concept of 'one nation-one tax' has simplified the previously complex structure of multiple supply chain taxes in different states. This has resulted in effortless inter-state trade, improved business efficiency, and boosted tax compliance.
The digital implementation of GST, including online submissions and electronic documentation, has also played a role in easing inter-state trade. It has enhanced transparency and visibility into tax obligations for both enterprises and consumers, making it easier for businesses to meet their tax responsibilities. Additionally, the elimination of diverse state tax regulations has removed barriers to seamless interstate operations.
Overall, the introduction of GST in India has had a positive impact on inter-state trade, simplifying the tax structure, improving compliance, and enhancing the ease of doing business.
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Frequently asked questions
The GST Council is a constitutional body responsible for making recommendations and decisions on issues related to the implementation of the Goods and Services Tax (GST) in India. It consists of members from both the Centre and the States, including the Minister In-charge of finance or taxation from each State Government.
The Constitutional (122nd Amendment) Bill, also known as the Constitution Amendment Bill, was introduced in the Indian Parliament to enable the introduction of GST and create a harmonised system of taxation. It sought to address challenges with the current indirect tax regime by broadening the tax base, eliminating cascading taxes, increasing compliance, and reducing economic distortions caused by interstate variations in taxes.
The Bill was passed by the Rajya Sabha on 3rd August 2016 and the Lok Sabha on 8th August 2016. After ratification by more than 15 states, it received assent from the President on 8th September 2016, becoming the 101st Constitution Amendment Act. This act conferred simultaneous power on Parliament and State Legislatures to make laws governing GST and led to the creation of the GST Council.
