Compensation to States for loss of revenue on account of introduction of goods and services tax.


Clause 19 of the Bill provides for the following:

Parliament may, by law, on the recommendation of the Goods and Services Tax Council, provide for compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for such period which may extend to five years.

Arrangement for assignment of additional tax on supply of goods to States for two years or such other period recommended by the Council.

Clause 18 of the Bill provides for the following:

(1) An additional tax on supply of goods, not exceeding one per cent. in the course of inter-State trade or commerce shall, notwithstanding anything contained in clause (1) of Article 269A, be levied and collected by the Government of India for a period of two years or such other period as the Goods and Services Tax Council may recommend, and such tax shall be assigned to the States in the manner provided in clause (2).

(2) The net proceeds of additional tax on supply of goods in any financial year, except the proceeds attributable to the Union territories, shall not form part of the Consolidated Fund of India and be deemed to have been assigned to the States from where the supply originates.

(3) The Government of India may, where it considers necessary in the public interest, exempt such goods from the levy of tax under clause (1).

(4) Parliament may, by law, formulate the principles for determining the place of origin from where supply of goods take place in the course of inter-State trade or commerce.

Power of President to Remove Difficulties

Clause 21 of the Bill Provides for the following

(1) If any difficulty arises in giving effect to the provisions of the Constitution as amended by this Act (including any difficulty in relation to the transition from the provisions of the Constitution as they stood immediately before the date of assent of the President to this Act to the provisions of the Constitution as amended by this Act), the President may, by order, make such provisions, including any adaptation or modification of any provision of the Constitution as amended by this Act or law, as appear to the President to be necessary or expedient for the purpose of removing the difficulty:

Provided that no such order shall be made after the expiry of three years from the date of such assent.

(2) Every order made under sub-section (1) shall, as soon as may be after it is made, be laid before each House of Parliament.

Transitional Provisions

Notwithstanding anything in this Act, any provision of any law relating to tax on goods or services or on both in force in any State immediately before the commencement of this Act, which is inconsistent with the provisions of the Constitution as amended by this Act shall continue to be inforce until amended or repealed by a competent Legislature or other competent authority or until expiration of one year from such commencement, whichever is earlier

Article 268A Service tax levied by Union and collected and appropriated by the Union and the States

Existing Extract from Article 268A

(1) Taxes on services shall be levied by the Government of India and such tax shall be collected and appropriated by the Government of India and the States, in the manner provided in clause (2).
(2) The proceeds in any financial year of any such tax levied in accordance with the provisions of clause (1) shall be—

(a) collected by the Government of India and the States;
(b) appropriated by the Government of India and the States, in accordance with such principles of collection and appropriation as may be formulated by Parliament by law.

Proposed Position in the Bill – Omission of Article 268A .

Amendment to Seventh Schedule to the Constitution

Existing Extract in the following Seventh Schedule (Article 246)

List I- Union List

84. Duties of excise on tobacco and other goods manufactured or produced in India
except—

(a) alcoholic liquors for human consumption;
(b) opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry

92. Taxes on the sale or purchase of newspapers and on advertisements published
therein.

92C. Taxes on services.

List II-State List

52. Taxes on the entry of goods into a local area for consumption, use or sale therein.

54. Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I.

55. Taxes on advertisements other than advertisements published in the newspapers and advertisements broadcast by radio or television.

62. Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling.

Proposed Amendment to Seventh Schedule (Article 246)

(a) in List I — Union List,—

(i) for entry 84, the following entry shall be substituted, namely:—
“84. Duties of excise on the following goods manufactured or produced in India, namely:—

(a) petroleum crude;
(b) high speed diesel;
(c) motor spirit (commonly known as petrol);
(d) natural gas;
(e) aviation turbine fuel; and
(f) tobacco and tobacco products.”;

(ii) entries 92 and 92C shall be omitted;

(b) in List II — State List,—

(i) entry 52 shall be omitted;

(ii) for entry 54, the following entry shall be substituted, namely:—
“54. Taxes on the sale of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption, but not including sale in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods.”;

(iii) entry 55 shall be omitted;

(iv) for entry 62, the following entry shall be substituted, namely:—

“62. Taxes on entertainments and amusements to the extent levied and collected by a Panchayat or a Municipality or a Regional Council or a District Council.”.

Therefore it shall be read as follows:

List I- Union List

84. Duties of excise on the following goods manufactured or produced in India, namely:—

(a) petroleum crude;
(b) high speed diesel;
(c) motor spirit (commonly known as petrol);
(d) natural gas;
(e) aviation turbine fuel; and
(f) tobacco and tobacco products

List II-State List

54. Taxes on the sale of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption, but not including sale in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods

62. Taxes on entertainments and amusements to the extent levied and collected by a Panchayat or a Municipality or a Regional Council or a District Council

Amendment to Sixth Schedule to the Constitution

[Articles 244(2) and 275(1)]

Existing Extract from In the Sixth Schedule to the Constitution (Provisions as to the Administration of Tribal Areas in the States of Assam, Meghalaya, Tripura and Mizoram,) in paragraph 8, in sub-paragraph (3),

(3) The District Council for an autonomous district shall have the power to levy and collect all or any of the following taxes within such district, that is to say—

(c) taxes on the entry of goods into a market for sale therein, and tolls on passengers and goods carried in ferries; and
(d) taxes for the maintenance of schools, dispensaries or roads.

Proposed Amendment to the Sixth Schedule to the Constitution, in paragraph 8, in sub-paragraph (3),

In the Sixth Schedule to the Constitution, in paragraph 8, in sub-paragraph (3),—
(i) in clause (c), the word “and” occurring at the end shall be omitted;
(ii) in clause (d), the word “and” shall be inserted at the end;
(iii) after clause (d), the following clause shall be inserted, namely:—
“(e) taxes on entertainment and amusements.

Therefore it shall be read as follows:

(3) The District Council for an autonomous district shall have the power to levy and collect all or any of the following taxes within such district, that is to say—

(c) taxes on the entry of goods into a market for sale therein, and tolls on passengers and goods carried in ferries;
(d) taxes for the maintenance of schools, dispensaries or roads and

(e) taxes on entertainment and amusements

Article 368 Power of Parliament to amend the Constitution and procedure therefore

Existing Extract from Article 368(2)

An amendment of this Constitution may be initiated only by the introduction of a Bill for the purpose in either House of Parliament, and when the Bill is passed in each House by a majority of the total membership of that House and by a majority of not less than two-thirds of the members of that House present and voting, it shall be presented to the President who shall give his assent to the Bill and thereupon the Constitution shall stand amended in accordance with the terms of the Bill:

Provided that if such amendment seeks to make any change in—
(a) article 54, article 55, article 73, article 162 or article 241, or
(b) Chapter IV of Part V, Chapter V of Part VI, or Chapter I of Part XI, or
(c) any of the Lists in the Seventh Schedule, or
(d) the representation of States in Parliament, or
(e) the provisions of this article,

the amendment shall also require to be ratified by the Legislatures of not less than onehalf of the States by resolutions to that effect passed by those Legislatures before the Bill making provision for such amendment is presented to the President for assent.

Proposed Amendment to Article 368(2)

In article 368 of the Constitution, in clause (2), in the proviso, in clause (a), for the words and figures “article 162 or article 241”, the words, figures and letter “article 162, article 241 or article 279A” shall be substituted.

Therefore Clause shall be read as follows:

An amendment of this Constitution may be initiated only by the introduction of a Bill for the purpose in either House of Parliament, and when the Bill is passed in each House by a majority of the total membership of that House and by a majority of not less than two-thirds of the members of that House present and voting, it shall be presented to the President who shall give his assent to the Bill and thereupon the Constitution shall stand amended in accordance with the terms of the Bill:

Provided that if such amendment seeks to make any change in—
(a) article 54, article 55, article 73, article 162, article 241 or article 279A, or
(b) Chapter IV of Part V, Chapter V of Part VI, or Chapter I of Part XI, or
(c) any of the Lists in the Seventh Schedule, or
(d) the representation of States in Parliament, or
(e) the provisions of this article,

the amendment shall also require to be ratified by the Legislatures of not less than onehalf of the States by resolutions to that effect passed by those Legislatures before the Bill making provision for such amendment is presented to the President for assent.

Article 366 Meaning of Goods and Services Tax(GST) & Services

Proposed Amendment to Article 366 of the Constitution

(i) after clause (12), the following clause shall be inserted, namely:—

‘(12A) “goods and services tax” means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption;’

(ii) after clause (26), the following clauses shall be inserted, namely:—

‘(26A) “Services” means anything other than goods;
(26B) “State” with reference to articles 246A, 268, 269, 269A and article 279A includes a Union territory with Legislature;’.

Therefore in Conclusion

Article 366 Clause (12) Defines Goods

Goods includes all materials, commodities, and articles

Article 366 Clause (12A) Defines Goods and Services Tax

GST means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption

Article 366 Clause (26A) Defines Services

“Services” means anything other than goods

Article 366 Clause (26B) Defines State

“State” with reference to articles 246A, 268, 269, 269A and article 279A includes a Union territory with Legislature

 

Article 286 Restrictions as to imposition of tax on the Sale or Purchase of Goods.

Existing Extract from Article 286

(1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place—

(a) outside the State; or
(b) in the course of the import of the goods into, or export of the goods out of, the territory of India.

(2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1).

(3) Any law of a State shall, in so far as it imposes, or authorises the imposition of,—

(a) a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce; or
(b) a tax on the sale or purchase of goods, being a tax of the nature referred to in sub-clause (b), sub-clause (c) or sub-clause (d) of clause (29A) of article 366, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify.

Proposed Amendment to Article 286

In article 286 of the Constitution,—

(i) in clause (1),—

(A) for the words “the sale or purchase of goods where such sale or purchase takes place”, the words “the supply of goods or of services or both, where such supply takes place” shall be substituted;

(B) in sub-clause (b), for the word “goods”, at both the places where it occurs the words “goods or services or both” shall be substituted;

(ii) in clause (2), for the words “sale or purchase of goods takes place”, the words “supply of goods or of services or both” shall be substituted;
(iii) clause (3) shall be omitted.

Therefore Clause shall be read as follows:

(1) No law of a State shall impose, or authorise the imposition of, a tax on the supply of goods or of services or both, where such supply takes place—

(a) outside the State; or
(b) in the course of the import of the goods or services or both into, or export of the goods or services or both out of, the territory of India.

(2) Parliament may by law formulate principles for determining when a supply of goods or of services or both in any of the ways mentioned in clause (1).