GST Lec.

1
 Genesis
• 2000, the then prime minister mooted the concept of GST
• 2003, Central Government formed a task force on Fiscal
Responsibility and Budget Management, which in year 2004
strongly recommended GST on national basis
• [Link], then FM, while presenting Union Budget 2006-07
announced that GST would be implemented from April 1,2010
• NDA government tabled Constitution (122nd Amendment) Bill,2014
on GST in Parliament on December 19,2014.
• Loksabha passed the bill on May 6,2015 and Rajyasabha on August
3rd ,2016
• Subsequently on ratification by more than 50 percent states the
bill received presidential assent on September 8,2016 and
Constitution (122nd Amendment Bill) became Constitution (101st
Amendment) Act, 2016 which paved the way for implementation
of GST in India
 Contd.
• In the following year on March 27,2017 four
bills were introduced in Lok Sabha
– Central Goods and Services Tax Bill,2017
– Integrated Goods and Services Tax Bill,2017
– Union Territory Goods and Services Tax Bill,2017
– GST (Compensation to States) Bill,2017 were
introduced in Lok Sabha
 Taxes subsumed in GST
• Central taxes
– Central Excise Duty and Additional Excise Duties
– Service Tax
– Excise duties under Medicinal and Toilet
Preparations Act
– Counter vailing duty (CVD) and special CVD
– Central Sales Tax
– Central surcharges and cesses in so far as they
relates to supply of goods or services or both
 Contd.
• State taxes
– Entertainment taxes (except those levied by
bodies)
– Tax on lottery, betting and gambling
– Entry tax (all forms) & Purchase tax
– VAT Sales tax
– Luxury tax
– Taxes on advertisement
 Central taxes
• Central Excise Duty and Additional Excise Duties- Tax levied on
domestically produced goods.
• Excise duty is paid by
– Manufacturer
– Who get goods manufactured by hired labours
– Who gets goods manufactured by other parties
– Charged on production of goods
– Governed by Central Excise Act,1944 and Central Excise Tariff Act, 1985
– CBIC is controlling body
– Types of excise duties
• Basic excise duty-Goods under schedule one of Central Excise Tariff Act, 1985 it is
imposed on all excisable goods except salt
• Additional Excise duty-Goods that are in Sec.3 of Additional Duties of Excise Act, 1957,
shared between center and states and is levied instead of Sales Tax
• Special Excise Duty-Goods under schedule two of Central Excise Tariff Act,1985.
 Services tax
• Tax levied on provision of services by service providers.
Burden is on the consumer of such services
• Considering services constitute important part in economy,
for the first time tax on services were imposed on telecom,
non life insurance and stock broking in the year 1994
• The legal provisions relating to Service Tax were in Finance
Act, 1994, law relating to Service Tax is governed by Chapter
V of such Act
• Subsequently it is made applicable except on services
contained in negative list and based on Place of Provisions
of Service Rules 2012 and collected as per Point of Taxation
Rules 2011
Excise duty under Medicinal and Toilet
Preparation Act
• Medicinal and Toilet Preparations (Excise Duties) Act was
enacted in 1955 to provide for levy and collection of duties
of excise on medicinal and toilet preparations containing
alcohol, opium, Indian hemp, and other narcotic drugs and
narcotics
• This act was enacted to bring uniformity in levy of duty on
production of medicinal and toilet products using alcohol.
Alcohol manufacturing was subject to levy of state excise
duty. Each State has its own rules governing export of and
import into the state, alcohol, leading to diversity in rates,
procedures
• Thus entry relating to Medicinal and Toilet Preparation
containing alcohol is shifted to Union list form State list and
Medicinal and Toilet Preparation Act, 1955 was enacted
 Counter vailing duty and SCVD
• Counter vailing duty is imposed on imported
products to bring such products at par with
similar products in domestic market
• Such products are produced in exporting
country using subsidies
• Such duty is to counter the subsidy provided
to the producers of such products
 Central Sales tax
• This is a sale tax imposed on interstate trade and
commerce in a country
• It is an indirect, origin based tax
• It is included in Union list, therefore, the prerogative of
Central Government to levy the same. However it is
administered by the state in which sale originates
• CST is as percentage of the sale price of commodity
• Sale Tax officer who is responsible for assessment and
collection of state sales tax is also made to assess and
collect CST
• Governed by Central Sales Tax Act,1956
 State Taxes
• Entertainment Tax- Taxes and fees on
entertainment, betting and gambling is levied by
State Government by virtue of power vested
under it under Art.246 read with entries 62 and 66
of II list of Seventh Schedule of Constitution of
India
• With the introduction of GST, the entertainment
tax is subsumed in it, consequently there is no
separate levy of ET in India
• However few states are charging an additional
amount over GST . Present GST rate is 18 per cent
 Tax on lottery, betting and Gambling
• Presently under GST attracting 28% tax rate
 Entry Tax and Purchase tax
• Entry tax was charged by certain states on all
interstate transfers of goods. In GST no such
entry tax is leviable except on some
commodities on which additional 1 % is levied
in case of interstate supply
• Purchase tax was imposed by states on buying
of goods
 Luxury tax
• 5-star restaurants will come under the luxury
tax bracket of 28%. Lodges, clubs and hotels
which charge tariff rates that are less than
₹1,000 will be taxed at 5%. Lodges, clubs and
hotels which charge tariff rates that are
between ₹1,000 and ₹2,500 will be taxed at
12%.
 Tax on advertisement
• The advertising agency buys the space on
behalf of the advertiser but charges
commission for the same. In such a case, GST
would be levied at 5% for advertisement in
print media or 18% for advertisement in digital
media.
 Constitutional Provisions
• Constitution is supreme law of India it has
three parts: Preamble, 25 parts containing 448
articles and 12 schedules
• Levy and collection of taxes emerges from
constitution of India and law, act, rule, order
or notification if is in non conformity with it be
called ‘ultra vires’ the constitution and shall be
null and void
• Art 265: No tax shall be levied except as per authority
of law
• Art 245: Power of enacting legislation is conferred
upon the Parliament and respective State Legislatures
• Art 246: Power to legislate is divided between center
and states
• VIIth Schedule: Contains three list
– Union list –contains matters in respect of which parliament
has exclusive rights to make laws
– State list-States have exclusive rights
– Concurrent list-matters on which both center and states
have rights
 Contd:
• Entry no 82 to 91 in Union list, Parliament can
make laws to levy taxes
• Entry no 45 to 63 in State list , state
legislatures can make laws to levy taxes
 Need for Constitutional Amendment
• CAA 2016 has 20 sections
• Inserted Art 279A whereby President is
empowered to constitute Goods and Services Tax
Council
• CAA has also provided for compensation to
revenue loss of states by implementation of GST.
Parliament shall enact on recommendation of the
council, a law for compensation to states on
implementation of Goods and Services Tax
 Significant provisions of CAA
• Concurrent power on center and states of enact laws concerning goods and services
• Levy of IGST on interstate supply of goods or services or both to be levied and
collected by central government and to be apportioned between center and state in
a manner provided by Parliament on recommendation of council
• Principles determining palace of supply , where supply takes place in course of
interstate trade or commerce shall be formulated by Parliament by law
• GST shall be levied on all goods and services except on alcoholic liquor for human
consumption
• On following GST shall not be levied till it is notified on recommendation of council
– Motor spirit (petrol)
– Diesel
– Petroleum Crude
– Natural Gas
– Aviation turbine fuel
• Union government shall retain power to levy excise duty on manufacturing of
Tobacco, and tobacco products manufactured in India
• Art.279A empowers to constitute a joint
forum of center and states: GST Council
• Minister of finance shall be
chairman/chairperson and ministers of
finance/taxation of respective states/UT or
minister nominated shall be its member, union
minister of state in charge of revenue or
finance shall also be its member
• Concept of ‘declared goods of special importance ’
has done away with. Earlier only center has power
to levy any tax on such goods
• Transitional provisions to take care of any
inconsistency with respect to any law relating
goods or services or both, in force in any states.
Such law shall continue to be in force until
amended, repealed or until expiration of one year
from commencement of GST, which ever is earlier
 Art:246A
• Empowering both center and states to make
laws with respect to GST imposed by center or
such state
• Center has exclusive power to make laws in
respect of interstate trade of goods/services
• Provisions of Art.246A is to be in force
notwithstanding anything contained in Art.246
or Art.254 ( supremacy of law by Parliament)
 Art.269A
• Levy and collection of GST on interstate supply
– Such tax to be levied and collected by center to be
apportioned with state in a manner as may be provided by
Parliament by law on recommendation of GST council
– Amount apportioned to state shall not be part of
Consolidated Fund of India
– When an amount which is collected as IGST is used for
payment of SGST or vice versa then such amount shall not
be consolidated fund of India or consolidated fund of state.
This is to facilitate transfer of funds between center and
states
– Parliament shall make law determining palace of supply in
respect of place of supply for goods, services or both
 Art.279A
• Goods and Service Tax Council
– CAA empowers president to constitute a joint forum of
center and states namely Goods and Services Tax
Council
– Provisions relating to composition came into effect on
September15,2016
– Shall consist of the following
• Union minister of finance as chairman/chairperson
• Union minister of state in charge of Revenue or Finance
• Minister in-charge of revenue/taxation or other as
nominated by state governments
 Contd.
• GST council shall recommend Union and States on
– taxes, surcharges and cess that are levied by Union, States and Local bodies to
be subsumed in GST
– Goods and Services that may be exempted from GST
– Model Goods and Services Tax laws, principles of levy, apportionment of GST in
course of interstate trade and commerce, and principles that governs the place
of supply
– Threshold limit of turnover below which Goods and Services or both may be
exempted from GST
– Rates including floor rates with bands of GST
– Any special rate or rates for specified period to raise additional resources during
natural calamity or disaster
– Special provisions in respect of state of Assam, J&K(#),Manipur, Meghalaya,
Manipur, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, and
Uttarakhand such states are known as special category state
– Any matter relating to Goods and Services Tax as council may decide
• Council shall recommend date on which GST to be
levied on Petrol, diesel, LPG,LNG, Crude
• One half of total members shall constitute quorum
• Decision by majority of 3/4th of weighted votes of
member present and voting in accordance with
following formula
– Vote of central government has weight of 1/3rd of total vote
cast
– Vote of all State Government taken together shall have
weightage of two third of total votes cast in the meeting
 Contd.
• No act or proceeding of GST council shall be
invalid because
– Any vacancy, defect in constitution of council,
– Defect in appointment of person as a member of
the council,
– Any procedural irregularity not affecting merit of
the case
• Council shall constitute a mechanism of
adjudicate a dispute between
– Center and State
– Between GoI and State(s) or in between States
– In between two or more states