All we know that any tax can only be levied under authority of law. For the Union of India law may be made by the Parliament and for the States law may be made by the Legislature of the respective States. The Parliament and Legislatures of the States both derive their law making powers from the Constitution of India. Careful study of relevant provisions of the Constitution reveals that the Constitution gives powers, as mentioned hereunder, to the Parliament to make goods and services tax (hereinafter referred to as GST) laws and other related and connected matters.
1. Article 246A(1) gives powers to the Parliament for making law for providing levy and collection of GST on all types of supplies of goods or services or both except the following supplies of goods or services or both, namely-
- supply of goods or services or both where such supply takes place in the course of inter-State trade or commerce; and
- supply of goods or services or both where such supply takes place in the course of import into the territory of India;
2. Clause (1) of Article 269A, read with clause (2) of Article 246A, gives powers to the Parliament to make law to provide levy and collection of GST on following supplies of goods or services or both, namely-
- supply of goods or services or both where such supply takes place in the course of inter-State trade or commerce; or
- supply of goods or services or both where such supply takes place in the course of import into the territory of India.
3. Clause (1) of Article 269A requires the Parliament to provide, by law, the manner in which GST collected on following supplies of goods or services or both shall be distributed in between the Union and the States, where such supply takes place─
- supply of goods or services or both where such supply takes place in the course of inter-State trade or commerce; and
- supply of goods or services or both where such supply takes place in the course of import into the territory of India.
4. Clause (5) of Article 269A provides that the Parliament may, by law, formulate principles for determining place of supply of goods or services or both.
5. Clause (5) of Article 269A provides that the Parliament may, by law, formulate principles for determining when a supply of goods or services or both takes place in the course of inter-State trade or commerce.
6. Clause (2) of Article 286 provides that the Parliament may, by law, formulate principles for determining when a supply of goods or services or both takes place outside the State;
7. Clause (2) of Article 286 provides that the Parliament may, by law, formulate principles for determining when a supply of goods or services or both takes place in the course of import of goods or services or both into the territory of India.
8. Clause (2) of Article 286 provides that the Parliament may, by law, formulate principles for determining when a supply of goods or services or both takes place in the course of export of goods or services or both out of the territory of India.
9. Section 18 of the Constitution (One Hundred And First) Amendment Act, 2016 provides that Parliament shall, 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 a period of five years.
However, by now, no laws have been enacted by the Parliament on matters mentioned against serial no(s). 5, 6, 7 and 8 above. On recommendation of Goods and Services Tax Council (hereinafter referred to as the CST Council), the Parliament has defined “intra-State supply of goods or services or both” and on the basis of recommendation of the said Council, State Goods and Services Tax Laws have been enacted by the States to provide levy and collection of GST on such intra-State supply of goods or services or both. It is noteworthy that certain supplies of goods and services which, in all respects take place inside a State, have been excluded from the definition of intra-State supply of goods or services or both.
In absence of principles referred to against serial no(s). 5, 6, 7 and 8 herein above, many incorrect interpretations are being made. Section 7 of the Integrated Goods and Services Tax Act, 2017 mentions certain supplies of goods or services or both which are to be treated supplies of goods or services or both in the course of inter-State trade or commerce. In sub-section (5) of the said section 7, in respect of certain supplies which are of export nature and certain other supplies of goods or services or both, which in all respects take place inside a State or a Union Territory, provision has been made to treat them supplies of goods or services or both in the course of inter-State trade or commerce. Therefore, provisions of section 7 cannot be treated principles for determining when a supply of goods or services or both takes place in the course of inter-State trade or commerce.
It seems that law drafters, while preparing Model GST Law, had lost sight of such provisions of the Constitution. Reason may be that such provisions have not been specifically mentioned in the matters on which the GST Council was expected to send its recommendations. But when the Council was expected to send draft of Model Law, it had within the purview of job assigned to the GST Council. Also clause (4) (h) of Article runs as follows:–
” (h) any other matter relating to the goods and services tax, as the Council may decide.”
Therefore, it cannot be said that the GST Council had no powers to make its recommendations on matters referred against serial no(s). 5, 6. 7 and 8 herein above. I hope that the GST Council will make its recommendations to the Central Government so that appropriate principles may be formulated by the Parliament.
Author Bio
