Jonah Patel
The introduction of the Goods and Services Tax (GST) in India required an amendment to the Constitution, as it involved restructuring not only the indirect taxes levied by the Centre but also the States. The Constitutional (122nd Amendment) Bill, 2014, also known as the Constitution Amendment Bill, was passed by the Lok Sabha in May 2015 and by the Rajya Sabha on 3rd August 2016. It was then passed by more than 15 states and received the President's assent on 8th September 2016, coming into effect as the 101st Constitution Amendment Act, 2016. This amendment gave simultaneous power to the Parliament and State Legislatures to make laws governing GST and established the GST Council, a joint forum of the Centre and States, to make recommendations on issues related to GST implementation. The GST was finally launched nationwide on 1st July 2017, replacing 17 central and state taxes and creating a unified market for a $2.4 trillion economy serving 1.3 billion citizens.
| Characteristics | Values |
|---|---|
| Name of the bill | Constitutional (122nd Amendment) Bill, 2014 |
| Abbreviation | CAB |
| Date introduced in Parliament | 2014 |
| Date passed by Lok Sabha | May 2015 |
| Date passed by Rajya Sabha | 3rd August 2016 |
| Date passed by Lok Sabha after amendments | 8th August 2016 |
| Number of states that passed the bill | More than 15 |
| Date of President's assent | 8th September 2016 |
| Enacted as | 101st Constitution Amendment Act, 2016 |
| Purpose | To enable the introduction of GST and confer simultaneous power upon Parliament and the State Legislatures to make laws governing goods and services tax |
| Article amended to include definitions | Article 366 |
| Article amended to restrict states from passing laws | N/A |
| Article giving power to the President to constitute the GST Council | Article 279A |
| Date by which the GST Council had to be constituted | Within 60 days of the commencement of the Constitution (One Hundred and First) Amendment Act, 2016 |
| Date of first meeting of the GST Council | 22nd and 23rd September 2016 |
| Date of notification by the Government of India | 16th September 2016 |
| Date by which GST had to be brought into effect | 15th September 2017 |
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What You'll Learn
The GST Council
The Goods and Services Tax (GST) Council is a constitutional body responsible for making recommendations on issues related to the implementation of the GST in India. The GST Council is a joint forum of the Centre and the States, consisting of the following members: the Union Finance Minister of India, who chairs the council, the Union Revenue Secretary, who serves as the ex-officio Secretary to the Council, and the finance minister from each Indian state.
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GST-related work
The implementation of the Goods and Services Tax (GST) in India required an amendment to the Constitution, which was enabled by the Constitutional (122nd Amendment) Bill, or CAB, passed in 2016. This amendment bill conferred simultaneous power upon the Parliament and State Legislatures to make laws governing GST and led to the creation of the Goods and Services Tax Council, or GST Council.
The GST Council is a constitutional body responsible for making recommendations on issues related to the implementation of GST in India. It is a joint forum of the Centre and the States, consisting of members such as the Minister In-charge of finance or taxation or any other Minister nominated by each State Government. The GST Council has to be constituted by the President within 60 days of the commencement of the Constitution (One Hundred and First) Amendment Act, 2016.
The GST Council meets periodically to deliberate and decide on various issues related to GST, taking decisions through a consensus-based approach. It makes recommendations on important issues related to GST, such as goods and services that may be subjected to or exempted from GST, model GST laws, principles that govern the place of supply, threshold limits, GST rates, and special provisions for certain states.
To assist in GST-related work, there are software solutions and certification courses available that can help CAs, tax experts, and businesses manage returns and invoices. These platforms also offer tutorial videos, guides, and expert assistance to help users master the complexities of GST. Additionally, businesses can seek assistance with registering for the Goods & Services Tax Law.
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Tax on supply of goods and services
The Goods and Services Tax (GST) is a type of indirect tax levied on the supply of goods and services. It was implemented in India on 1 July 2017, following the passing of the Constitutional (122nd Amendment) Bill, also known as the Constitution Amendment Bill, in the Parliament. This bill was passed by the Rajya Sabha on 3 August 2016 and the Lok Sabha on 8 August 2016, receiving the assent of the President on 8 September 2016.
The GST replaced numerous previous indirect taxes, including excise duty, service tax, value-added tax (VAT), entertainment tax, and Octroi. It is a comprehensive, multistage, destination-based tax, imposed at every step of the production process but refunded to all parties except the final consumer. The GST is meant to be collected from the point of consumption rather than the point of origin.
The GST has introduced different tax rates for various goods and services, with goods and services divided into five tax slabs for collection: 0%, 5%, 12%, 18%, and 28%. The general rate of tax is 18% for the majority of supplies. However, certain goods and services are exempt from GST, such as electrical energy, while some categories are subject to compensation cess, including vehicles and aerated beverages. Additionally, the GST does not cover certain products, such as petroleum products, alcoholic beverages, and electricity, which are instead taxed separately by individual state governments.
The GST regime has a system known as the Reverse Charge Mechanism (RCM), where the receiver pays the tax on behalf of unregistered, smaller material and service suppliers. The receiver of the goods is eligible for Input Tax Credit (ITC), which can be claimed on the tax paid on inward supplies and set off against tax liability on output. The ITC mechanism aims to prevent the cascading effect of taxes and ensure taxation only on the value-added at each stage of the supply chain.
To address issues related to the GST, a constitutional body called the GST Council was formed. It consists of members from both the Centre and the States and is responsible for making recommendations on issues concerning the implementation of the GST. The Council takes decisions through a consensus-based approach, promoting the spirit of cooperative federalism.
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GST implementation
The implementation of the Goods and Services Tax (GST) in India was a significant milestone in the country's economic history. The GST was introduced to streamline the nation's indirect tax system and reduce inflation in the long run. It replaced multiple taxes levied by the central and state governments, such as excise duty, service tax, and value-added tax (VAT). The GST was expected to increase India's GDP growth rate by over 1% and positively impact the country's economy by simplifying the tax system, lowering production costs, and making Indian goods more competitive in the international market.
The process of implementing the GST in India began with the introduction of the Constitutional (122nd Amendment) Bill in 2014, also known as the GST Bill. The Bill was passed by the Lok Sabha in May 2015 and by the Rajya Sabha on August 3, 2016, with certain amendments. The Bill was then passed by more than 15 states and received the President's assent on September 8, 2016, becoming the 101st Constitution Amendment Act, 2016. This Act conferred simultaneous power upon Parliament and the State Legislatures to make laws governing GST and led to the creation of the Goods and Services Tax Council.
The GST Council, an apex body consisting of representatives from both the Central and State Governments, is responsible for making recommendations on issues related to the implementation of GST in India. The Council has been instrumental in deciding key issues such as tax rates, exemptions, thresholds, and administrative procedures. The first meeting of the GST Council was held on September 22-23, 2016, and it continues to meet periodically to address various GST-related matters.
The GST came into effect in India on July 1, 2017, with four tax slabs: 5%, 12%, 18%, and 28%. Essential commodities such as certain foods, books, and homespun cotton cloth were taxed at a lower rate of 0% or 5%, while luxury items such as refrigerators, cars, and cigarettes fell under the highest tax bracket of 28%. The GST also included a cess of 22% on top of the 28% GST rate for certain items like aerated drinks, luxury cars, and tobacco products.
While the introduction of GST in India was a watershed moment in the country's tax structure, it also faced some criticism and challenges. There were initial implementation issues, such as system crashes during the filing of GST returns and opposition from political parties like the Indian National Congress, who argued that GST disproportionately burdens lower-income households. Additionally, there were criticisms of delays in compensation to states and tax refund delays for businesses. However, the GST Council has demonstrated flexibility by frequently reviewing and amending policies to address these concerns. Overall, the implementation of GST in India has had a significant impact on the country's economy and tax system.
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GST-related laws and policies
The implementation of the Goods and Services Tax (GST) in India required an amendment to the Constitution. This was achieved through the Constitutional (122nd Amendment) Bill, also known as the Constitution Amendment Bill or CAB, which was introduced in Parliament in 2014. The Bill was passed by the Lok Sabha in May 2015, but due to disagreements from the Opposition, it was sent back for review. Finally, in August 2016, the Bill was passed by the Rajya Sabha and the Lok Sabha, receiving assent from the President on 8 September 2016. This became the 101st Constitution Amendment Act, 2016, which gave power to the Parliament and State Legislatures to create laws governing GST and establish the Goods and Services Tax Council.
The GST Council is a constitutional body responsible for making recommendations and decisions on issues related to the implementation of GST in India. It consists of members from both the Centre and the States, including the Union Finance Minister as chairperson and Union Minister of States in charge of revenue or finance. The Council takes decisions through a consensus-based approach, with a majority of not less than three-fourths of weighted votes.
The GST Council has been instrumental in shaping GST-related laws and policies in India. It has decided on key issues such as tax rates, exemptions, thresholds, and administrative procedures. For instance, the Council approved the roll-out of an e-invoicing system, reduced GST rates on electric vehicles, and recommended amendments to the CGST Act and Rules to provide a legal framework for the Invoice Management System. During the COVID-19 pandemic, the GST Council approved the rationalization of duty on specified COVID-related goods and introduced measures to facilitate trade and ease compliance for taxpayers.
Additionally, the GST Council has approved the creation of the Goods and Services Tax Appellate Tribunal (GSTAT), with its National Bench situated in New Delhi. GSTAT is responsible for handling GST-related complaints and is presided over by a President, along with Technical Members from the Centre and State.
The implementation of GST in India has led to a shift in the tax regime, presenting challenges and the need for proper training and education to ensure compliance, especially for small and medium-sized enterprises.
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Frequently asked questions
The name of the constitutional amendment bill related to GST is the One Hundred and First Amendment Act, 2016.
The constitutional amendment bill was passed by the Lok Sabha on 8th August 2016 and received the President's assent on 8th September 2016.
The purpose of the bill was to introduce a national Goods and Services Tax (GST) in India, which came into effect on 1st July 2017. GST replaced all indirect taxes levied on goods and services by the Indian Central and state governments, creating a seamless national market.
