In this article, I will like to draw attention of learned readers of this article towards certain aspects of tax levy provisions of various goods and services tax laws. Section 9 of the Central Goods and services Tax Act, 2017, with its marginal note “Levy and collection” runs as follows:–
“9. (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person.
(2) The central tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council.
(3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
(4) The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
(5) The Government may, on the recommendations of the Council, by notification, specify categories of services the tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services:
Provided that where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax:
Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also he does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.”
First thing which I would like to discuss here is that sub-section (1) of above quoted section 9, of the CGST, has been enacted subject to provisions of sub-section (2) alone. But the levy provided in sub-section (1) is subjected to provisions of all other sub-sections of the said section 9 as well as to other provisions of the Act. A fiscal law may, apart from providing levy of tax, also provide exemption from tax, refund or rebate of tax, or zero rating of taxable events. Such provisions override the tax levy provision. Their effect is to modify the tax levy provision. In cases of delayed payments, provisions related to interest, penalties may be attracted. Tax may also be imposed on escaped or evaded turnover. Normally, tax is required to be paid in money but under VAT or GST system of payment of tax, tax can also be paid by utilising amount of input tax credit. For such reasons, charging section of a fiscal law should start with “Subject to the other provisions contained in this Act”.
Selection of one out of several excludes others. Enactment of sub-section (1) subject to provisions of sub-section (2) indicates that levy of tax is only subjected to provisions of sub-section (2). Levy is not subjected to other provisions like exemption from tax, etc. Also, section 10 of the CGST Act provides alternate scheme of composition levy. For these and such other reasons, in my opinion, in sub-section (1) of section 9 of the CGST Act, in place of words “Subject to the provisions of sub-section (2)”, words “Subject to the other provisions contained in this Act,” should have been used.
The other thing towards which I will like to draw attention of readers is about creation of liability or charge. In my personal opinion, levy is imposed on the person in respect of certain property, capital gain or an event. In reference to levy of tax, the Honorable Supreme Court has, in its judgment in Messrs Chatturam Horilram Ltd vs. Commissioner of Income Tax, Bihar & Orissa, judgment dated 18 April, 1955, made following observations:–
‘As has been pointed out by the Federal Court in Chatturam v. C.I. T., Bihar (1) (quoting from the judgment of Lord Dunedin in Whitney v. Commissioners of Inland Revenue (2), “there are three stages in the imposition of a tax. There is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That, ex hypothesi, has already been fixed. But assessment particularises the exact sum which a person liable has to pay. Lastly, come the methods of recovery if the person taxed does not voluntarily pay”. [(1) [1947] F.C.R. 116 at 126. (2) [1926] A.C. 37.]’
The Honorable Supreme Court has, in its subsequent judgment in A. V. Fernandez vs. State of Kerala, judgment dated April 02, 1957, made following observations:–
‘”Reliance was placed in support of this position on the observations of this Court in Messrs. Chatturam Horilram Ltd. v. Commissioner of Income-Tax, Bihar and Orissa(1):
“As has been pointed out by the Federal Court in Chatturam v. C.I.T., Bihar (,) (quoting from the (1) [1955] 2 S.C.R. 290, 297. (2) [1947] F.C.R. 116, 126. 852) judgment of Lord Dunedin in Whitney v. Commissioners of Inland Revenue (1) ’there are three stages in the imposition of a tax. There is the declaration of liability, that is the part of the statute which determines what person in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That, ex-hypothesi, has already been fixed. But assessment particularises the exact sum which a person liable has to pay. Lastly, come the methods of recovery if the person taxed does not voluntarily pay”
The appellant, however, forgets that the three stages in the imposition of a tax which are laid down here predicate, in the first instance, a declaration of liability as the starting point. If there is a liability to tax, imposed under the terms of the taxing statute, then follow the provisions in regard to the assessment of such liability. If there is no liability to tax there cannot be any assessment either. Sales or purchases in respect of which there is no liability to tax imposed by the statute cannot at all be included in the calculation of turnover for the purpose of assessment and the exact sum which the dealer is liable to pay must be ascertained without any reference whatever to the same’.”‘
A tax is compulsory exaction of money by public authority for public purposes enforceable at law. In my opinion, in sub-section (1) of section 9 of the CGST Act, use of words “tax … shall be levied” is not suitable. Tax is levied by the Government under authority provided in the law. Use of words “shall be levied” may mean that when a supply will take place, the competent authority shall determine the levy, impose the levy on the taxable person and thereafter, the taxable person shall pay the levy. Thus section 9(1) itself does not create the liability or the charge. Instead it requires the Government to create the charge.
In view of the discussion above, in my personal opinion, tax levy and collection provision of the CGST Act could have been drafted, in a better way, as follows:–
Subject to the other provisions contained in this Act, every taxable person shall be liable to pay a tax, called central goods and services tax, on intra-State supply* of goods (except alcoholic liquor for human consumption), or of services or both made by him, on the value of the supply as determined under section 15 and at such rate, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and tax so levied shall be paid and collected in such manner as provided in, or as may be prescribed under, the Act.
Similar provisions have also been enacted in IGST Act, UTGST Act, SGST Acts and Cess Act. In my opinion, there cannot be any scope for debate on incorrect use of words “Subject to the provisions of sub-section (2)”.
*In Legislative drafting, singular includes plural and masculine includes feminine. For this reason, word “supply” has been used in place of the word “supplies”.
Disclaimer: Except the quoted versions, interpretations made and all other views expressed here are my personal views and are meant only for academic discussion. Readers are advised to follow the provisions of the law and to seek opinion of their legal advisors before acting upon the views expressed here. I and the publishers of this article disown any liability on account of any loss or damage that may be caused on account of use of views expressed here.
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