DS Mahajani *

DS MahajaniThe much awaited 122nd Constitutional Amendment Bill for implementation of Goods and Service-tax (the Constitutional Amendment Bill) has been passed by the Rajya Sabha on 3rd August 2016. Rightly so, 3rd August 2016 is the historic day in Indian taxation system, as on this day all multiple Indirect tax levies are set to be replaced by one tax – Goods and Service Tax (GST).

Before GST become a reality in the country (on 1st April 2017?), it has to pass thru the following three stage legislative journey –

  1. The Constitutional Amendment Bill shall be passed by majority of 29 States. After the Constitutional Amendment Bill is passed by (say) 15th State, it shall require the Assent of the President of India. Sooner the Constitutional Amendment Bill is passed by majority of the States; early will be the formation of the Goods and Services Tax Council.
  2. To pass the Central-GST Bill by the Lok Sabha, hopefully in the winter session of the Parliament in November 2016. As this is going to be the Money Bill, it will not require to be passed by the Rajya Sabha.
  3. To pass the State-GST Bill by all 29 States. If this goes hand-in-hand with Central-GST, it will be silver lining for all stakeholders for GST in India.

As per Article 279A of Constitutional Amendment Bill, the President shall, within sixty days from the date of commencement of Constitutional Amendment Bill, by order, shall constitute the GST Council. The Constitutional Amendment Bill has mentioned the functions of the GST Council. As per that the GST Council shall make recommendations to the Union and the States on –

(a) the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the goods and services tax;

(b) the goods and services that may be subjected to, or exempted from the goods and services tax;

(c) model Goods and Services Tax Laws, principles of levy, apportionment of Integrated Goods and Services Tax and the principles that govern the place of supply;

(d) the threshold limit of turnover below which goods and services may be exempted from goods and services tax;

(e) the rates including floor rates with bands of goods and services tax;

(f) any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster;

(g) special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and

(h) any other matter relating to the goods and services tax, as the Council may decide.

Please remember the GST Council shall have the recommendatory powers with respect to its functionality. During the actual functionality, it may so happen that the States may not agree with the recommendation of the GST Council, particularly on the following four points with respect to their diverse interests, that is on –

  1. The taxes, cesses and surcharges levied by the States;
  2. Principles of levy;
  3. Principles that govern the place of supply;
  4. The threshold limit of turnover.

As these issues are backbone for success of GST in India, we expect the GST Council will function diligently and shall actively engage with all States on regular basis. We know any derailment of discussion process at the GST Council may prove to be harmful as there is no clear-cut Dispute Resolution mechanism spelled out in the Constitutional Amendment Bill.

Considering above it is worthwhile to mention that after passing of the Constitutional Amendment Bill by the Parliament and its ratification  by majority of States (in next 3-4 weeks’ time), the focus for success of GST in India will be shifted on GST Council with regard to how it will function and corresponding responses by the States to it.

* The views expressed are personal.

[Author: DS Mahajani, M.Com, ACS, ACMA. He can be reached at DSMAHAJANI@YAHOO.COM.]

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