CA Mithun Khatry
GST: The Constitution (One Hundred & First Amendment) Act, 2016
How “The Constitution of India” drives the tax mechanism in India?
(With reference to GST in India)
All the taxes levied and collected by the Government in India are governed by one or the other powers vested to them through The Constitution of India. Till now reference to all the matters related to tax were mentioned in The Seventh Schedule of the Constitution of India. This Seventh Schedule of The Constitution of India comprise of three lists namely List-I i.e. Union List, List-II i.e. States List and List-III i.e. Concurrent List.
Article 246 of the Constitution provides the power to the Parliament to make laws regarding matters contained in list-I. Similarly power to make laws regarding matters contained in list-II has been given to the respective states & power to make laws regarding matters contained in list-III has been jointly given to both Parliament & the States. In case of some inconsistency between laws made by Parliament and laws made by the Legislatures of States, Article 254 of the Constitution provides powers to the Parliament to take final decision as regards matters covered in List-III.
Prior to the introduction of “The Constitution (One Hundred & First Amendment) Act, 2016”, there were 97 clauses in List-I, 66 clauses in List-II and 47 clauses in List-III. Not all these clauses are related to taxes, most of the matters mentioned in these lists are related to proper administration of the country like those relating to defense, army, CBI, Police, Floods, Draughts, direct taxes, indirect taxes and many more such issues. In this write-up since we are discussing only those articles of The Constitution which are related to indirect taxes in India, so only these entries related to indirect taxes prevailing in India as mentioned in this Seventh Schedule of The Constitution of India are enumerated below:
SEVENTH SCHEDULE [before The Constitution (One Hundred & First Amendment) Act, 2016]
(Article 246)
List I—Union List
41. Trade and commerce with foreign countries; import and export across customs frontiers; definition of customs frontiers.
42. Inter-State trade and commerce.
83. Duties of customs including export duties.
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.
87. Estate duty in respect of property other than agricultural land.
88. Duties in respect of succession to property other than agricultural land.
89. Terminal taxes on goods or passengers, carried by railway, sea or air; taxes on railway fares and freights.
90. Taxes other than stamp duties on transactions in stock exchanges and futures markets.
91. Rates of stamp duty in respect of bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts.
92. Taxes on the sale or purchase of newspapers and on advertisements published therein.
92A. Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce.
92B. Taxes on the consignment of goods (whether the consignment is to the person making it or to any other person), where such consignment takes place in the course of inter-State trade or commerce.
92C. Taxes on services.
97. Any other matter not enumerated in List II or List III including any tax not mentioned in either of those Lists.
List II—State List
26. Trade and commerce within the State subject to the provisions of entry 33 of List III.
45. Land revenue, including the assessment and collection of revenue, the maintenance of land records, survey for revenue purposes and records of rights, and alienation of revenues.
47. Duties in respect of succession to agricultural land.
48. Estate duty in respect of agricultural land.
49. Taxes on lands and buildings.
50. Taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development.
51. Duties of excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India:—
(a) alcoholic liquors for human consumption;
(b) opium, Indian hemp and other narcotic drugs and narcotics; but not including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry.
52. Taxes on the entry of goods into a local area for consumption, use or sale therein.
53. Taxes on the consumption or sale of electricity.
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.
56. Taxes on goods and passengers carried by road or on inland waterways.
57. Taxes on vehicles, whether mechanically propelled or not, suitable for use on roads, including tramcars subject to the provisions of entry 35 of List III.
58. Taxes on animals and boats.
59. Tolls.
60. Taxes on professions, trades, callings and employments.
61. Capitation taxes.
62. Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling.
63. Rates of stamp duty in respect of documents other than those specified in the provisions of List I with regard to rates of stamp duty.
List III—Concurrent List
33. Trade and commerce in, and the production, supply and distribution of,—
(a) the products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the public interest, and imported goods of the same kind as such products;
(b) foodstuffs, including edible oilseeds and oils;
(c) cattle fodder, including oilcakes and other concentrates;
(d) raw cotton, whether ginned or unginned, and cotton seed; and
(e) raw jute.]
35. Mechanically propelled vehicles including the principles on which taxes on such vehicles are to be levied.
44. Stamp duties other than duties or fees collected by means of judicial stamps, but not including rates of stamp duty.
For implementation of GST in India, The Constitution (One Hundred & First Amendment) Act, 2017 has brought some changes in The Constitution of India. Some Articles have either been amended or removed while some new Articles have also been inserted. Article 246A empowering the Parliament & the Sates to impose GST in India has been introduced. Similarly Article 279A has also been inserted for formation and management of GST Council in India. Let us now discuss these clauses one by one in a tabular format.
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Provision before amendment |
Provisions after amendment |
Effect of such amendment |
| New Article. | 246A. Special provision with respect to goods and services tax.
(1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State. (2) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. Explanation.—The provisions of this article, shall, in respect of goods and services tax referred to in clause (5) of article 279A, take effect from the date recommended by the Goods and Services Tax Council.’’. Section 279A talks about formation & working of GST Council |
After implementation of GST, states will also have the powers to make laws with respect to goods and services tax imposed by the Union or by such State. However in case of inter-state supplies power to make such laws will remain exclusively with the Parliament.
Power to levy tax on entries in List-I will continue to be with Union Government & Power to levy tax on entries in List-II will continue to be with State Government. All the conflicting entries in these schedules have either been removed or been modified by clause 17 of The Constitution (One Hundred & First Amendment) Act, 2017 So now power to impose tax in India shall be governed by Article 246A & The Seventh Schedule.
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| Article 248. Residuary powers of legislation
(1) Parliament has exclusive power to make any law with respect to any matter not enumerated in the Concurrent List or State List (2) Such power shall include the power of making any law imposing a tax not mentioned in either of those Lists
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Article 248. Residuary powers of legislation
(1) Subject to article 246A, Parliament has exclusive power to make any law with respect to any matter not enumerated in the Concurrent List or State List (2) Such power shall include the power of making any law imposing a tax not mentioned in either of those Lists |
Residuary power of the Parliament to make law with respect to any matter which is not covered in the Concurrent List or State List has been made conditional on Article 246A i.e. this exclusive power cannot be used by the Parliament to make laws related to levy of GST in India without the consensus of the respective States.
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| Article 249 Power of Parliament to legislate with respect to a matter in the State List in the national interest
(1) Notwithstanding anything in the foregoing provisions of this Chapter, if the Council of States has declared by resolution supported by not less than two thirds of the members present and voting that it is necessary or expedient in national interest that Parliament should make laws with respect to any matter enumerated in the State List specified in the resolution, it shall be lawful for Parliament to make laws for the whole or any part of the territory of India with respect to that matter while the resolution remains in force (2)… (3)… |
Article 249 Power of Parliament to legislate with respect to a matter in the State List in the national interest
(1) Notwithstanding anything in the foregoing provisions of this Chapter, if the Council of States has declared by resolution supported by not less than two thirds of the members present and voting that it is necessary or expedient in national interest that Parliament should make laws with respect to goods and services tax provided under article 246A or any matter enumerated in the State List specified in the resolution, it shall be lawful for Parliament to make laws for the whole or any part of the territory of India with respect to that matter while the resolution remains in force (2)… (3)… |
Article 249 gives power to the Parliament to enact any law applicable to states on the matters mentioned even in states list. However for this Parliament has to obtain support of at least two thirds of the members of Council of States. Since GST is not mentioned in States list, corresponding entry regarding GST in India is also made in Article 249 so as to enable the Parliament to implement & administer GST if at least two third member States agree to it.
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| Article 250. Power of Parliament to legislate with respect to any matter in the State List if a Proclamation of Emergency is in operation
(1) Notwithstanding anything in this Chapter, Parliament shall, while a Proclamation of Emergency is in operation, have, power to make laws for the whole or any part of the territory of India with respect to any of the matters enumerated in the State List (2)… |
Article 250. Power of Parliament to legislate with respect to any matter in the State List if a Proclamation of Emergency is in operation
(A) Notwithstanding anything in this Chapter, Parliament shall, while a Proclamation of Emergency is in operation, have, power to make laws for the whole or any part of the territory of India with respect to goods and services tax provided under article 246A or any of the matters enumerated in the State List (B)… |
In case of emergency, Article 250 gives power to the Parliament to enact any law applicable to states on the matters mentioned even in the States list. Since GST is not mentioned in States list, corresponding entry regarding GST is also made in Article 250 so as to enable the Parliament to legislate with respect to GST in case of Proclamation of Emergency. |
| Article 268. Duties levied by the Union but collected and appropriated by the States
(A) Such stamp duties and such duties of excise on medicinal and toilet preparations as are mentioned in the Union List shall be levied by the Government of India but shall be collected (i) in the case where such duties are leviable within any Union territory, by the Government of India, and (ii) in other cases, by the States within which such duties are respectively leviable (B)… |
Article 268. Duties levied by the Union but collected and appropriated by the States
(A) Such stamp duties and such duties of excise on medicinal and toilet preparations as are mentioned in the Union List shall be levied by the Government of India but shall be collected (i) in the case where such duties are leviable within any Union territory, by the Government of India, and (ii) in other cases, by the States within which such duties are respectively leviable
(B)… |
With reference to Additional Duties of Excise (Medicinal and toilet preparations), amendment in this articles revokes the power given to Union to levy such tax & revokes the power given to States to collect such tax. So, we can interpret here that Additional Duties of Excise (Medicinal and toilet preparations) is going to be subsumed into GST. |
| 268A. Service tax levied by Union and collected and appropriated by the Union and the States:
(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. |
–omitted—
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In order to subsume service tax into GST, Article 268A empowering states to collect service levied by the Union has been omitted from the Constitution.
Power to levy service tax has been given to Union by entry no. 92C of List-I of Seventh Schedule. So this entry has also been omitted from List-I. |
| Article 269 Taxes levied and collected by the Union but assigned to the States 1) Taxes on the sale or purchase of goods and taxes on the consignment of goods shall be levied and collected by the Government of India but shall be assigned and shall be deemed to have been assigned to the Stateson or after the 1st day of April, 1996 in the manner provided in clause (2)Explanation.—For the purposes of this clause,—(a) the expression “taxes on the sale or purchase of goods” shall mean taxes on sale or purchase ofgoods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce; (b) the expression “taxes on the consignment of goods” shall mean taxes on the consignment of goods (whether the consignment is to the person making it or to any other person), where such consignment takes place in the course of inter-State trade or commerce. (2).. |
Article 269 Taxes levied and collected by the Union but assigned to the States 1) Taxes on the sale or purchase of goods and taxes on the consignment of goods except as provided in article 269A shall be levied and collected by the Government of India but shall be assigned and shall be deemed to have been assigned to the Stateson or after the 1st day of April, 1996 in the manner provided in clause (2)Explanation.—For the purposes of this clause,—(a) the expression “taxes on the sale or purchase of goods” shall mean taxes on sale or purchase ofgoods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce; (b) the expression “taxes on the consignment of goods” shall mean taxes on the consignment of goods (whether the consignment is to the person making it or to any other person), where such consignment takes place in the course of inter-State trade or commerce. (2).. |
Article 269 & Entry no. 92A & 92B of List-I of The Seventh Schedule provides powers to the Union Government to levy & collect taxes on sale or purchase of goods and on the consignment of goods. As of now the taxes so collected are automatically assigned exclusively to the respective States. However under the proposed GST regime, tax on such inter-state transactions will be apportioned between the Union Govt. & the State Govt. so deemed assignment of GST to the State government of in case of inter-state transactions has been made subject to Article 269A which provides that such tax once collected shall be apportioned between the Centre & the State.
Though appropriate changes have been made in Article 269, but corresponding changes are not made in Entry. No. 92A & 92B of List-I of the Seventh Schedule. So does this means that the intention of the legislature is to impose CST on inter-state transactions of goods where such transactions takes place in the course of inter-State trade or commerce particularly in case of goods mentioned in entry no. 84 of List-I and entry no. 54 of List-II of the Seventh Schedule? |
| New section | 269A. Levy and collection of goods and services tax in course of inter-State trade or commerce.
(1) Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council. Explanation.—For the purposes of this clause, supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce. (2) The amount apportioned to a State under clause (1) shall not form part of the Consolidated Fund of India. (3) Where an amount collected as tax levied under clause (1) has been used for payment of the tax levied by a State under article 246A, such amount shall not form part of the Consolidated Fund of India. (4) Where an amount collected as tax levied by a State under article 246A has been used for payment of the tax levied under clause (1), such amount shall not form part of the Consolidated Fund of the State. (5) Parliament may, by law, formulate the principles for determining the place of supply, and when a supply of goods, or of services, or both takes place in the course of inter-State trade or commerce.’’ |
Through the introduction of this new article 269A, power of levy & collection of GST in course of inter-State trade or commerce is vested with Government of India, which shall be apportioned between the Union & the States in a manner prescribed. |
| 270. Taxes levied and distributed between the Union and the States.
(1) All taxes and duties referred to in the Union List, except the duties and taxes referred to in articles 268, 268A and 269, respectively, surcharge on taxes and duties referred to in article 271 and any cess levied for specific purposes under any law made by Parliament shall be levied and collected by the Government of India and shall be distributed between the Union and the States in the manner provided in clause (2). (1A) newly inserted (1B) newly inserted
(2)….. (3)….. |
270. Taxes levied and distributed between the Union and the States.
(1) All taxes and duties referred to in the Union List, except the duties and taxes referred to in articles 268, 269A and 269, respectively, surcharge on taxes and duties referred to in article 271 and any cess levied for specific purposes under any law made by Parliament shall be levied and collected by the Government of India and shall be distributed between the Union and the States in the manner provided in clause (2). (1A) The tax collected by the Union under clause (1) of article 246A shall also be distributed between the Union and the States in the manner provided in clause (2). (1B) The tax levied and collected by the Union under clause (2) of article 246A and article 269A, which has been used for payment of the tax levied by the Union under clause (1) of article 246A, and the amount apportioned to the Union under clause (1) of article 269A, shall also be distributed between the Union and the States in the manner provided in clause (2). (2)….. (3)….. |
As of now all the duties & taxes as mentioned in List-I are though levied & collected by Union Government but these are distributed between both Union and the states. However, there were three exceptions to this:
Since now Article 268A and entry no. 92C of List-I of seventh Schedule is omitted and Service tax is going to be subsumed under GST, so in Article 270, reference to Article 268A has been omitted and new reference to Article 269A for levy of GST for Inter-state transactions has been introduced. |
| Article 271 Surcharge on certain duties and taxes for purposes of the Union
Notwithstanding anything in Articles 269 and 270, Parliament may at any time increase any of the duties or taxes referred in those articles by a surcharge for purposes of the Union and the whole proceeds of any such surcharge shall form part the Consolidated Fund of India
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Article 271 Surcharge on certain duties and taxes for purposes of the Union
Notwithstanding anything in Articles 269 and 270, Parliament may at any time increase any of the duties or taxes referred in those articles except the goods and services tax under article 246A by a surcharge for purposes of the Union and the whole proceeds of any such surcharge shall form part the Consolidated Fund of India
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Powers of the Parliament to levy additional surcharge on Union taxes under Article 271, has been amended to revoke the power of Parliament to levy any such additional surcharge on GST. |
| Article 286 Restrictions as to imposition of tax on the sale or purchase of goods(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 29 A 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
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Article 286 Restrictions as to imposition of tax on the sale or purchase of goods
(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 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 sale or purchase of goods takes place supply of goods or of services or both 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 29 A 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
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Clause 1 and 2 of Article 286 has been amended to restrict the states from making any laws regarding supply of goods or services where such supply is outside their state or such supply is in course of import or export. Earlier such power was restricted only for goods.
Basically the words “sales” is replaced with “supply” and the word “goods” is replaced by “goods or services or both” Clause 3 of Article 286 which provided some conditions on States to impose a. tax on sales or purchase of goods of special importance in inter-state trade or commerce popularly known as DECLARED Goods. (rates of VAT & Excise on such goods were governed by the Union Government) b. tax on sales or purchase of goods mentioned under Article 366(29A)(b) i.e. CST on works contracts, Article 366(29A)(b) i.e. CST on hire-purchase or installment purchase of goods and Article 366(29A)(c) i.e. CST on Right to use of Goods. This clause has been removed, so now even inter-state transactions of such nature would attract GST. |
| 366. Definition In this Constitution, unless the context otherwise requires, the following expressions have l, the meanings hereby respectively assigned to them, that is to say
(12A) newly inserted
(26A) newly inserted
(26B) newly inserted
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366. Definition In this Constitution, unless the context otherwise requires, the following expressions have l, the meanings hereby respectively assigned to them, that is to say
(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; (26A) “Services” means anything other than goods; |
Three definitions have been added to the Constitution.
Definition of GST itself keeps the supply of the alcoholic liquor for human consumption out of purview of GST. Term “Services” has been assigned a very wide scope by giving it meaning as anything other than goods. States for the purpose of GST includes Union Territory also. It is worth to note here that As per clause 6 of Schedule-II of CGST Act’2017 supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration shall be treated as a supply of services.
As per article 366(29A)(f) of the Constitution supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made.
So this inconsistency has not been taken care of in this amendment. |
| 368. Power of Parliament to amend the Constitution and procedure therefore
(1) …… (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 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)… (c)… (d)… (e)… (3) ….. (4) ….. (5) …. |
368. Power of Parliament to amend the Constitution and procedure therefore
(1)……. (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 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 279A or Article 241, or (b)… (c)… (d)… (e)… (3) ….. (4) ….. (5) ….. |
As regards provisions and laws regarding to GST council, power has been vested to Parliament to amend the Constitution and procedure therefore. |
| SIXTH SCHEDULE
[Articles 244(2) and 275(1)] Provisions as to the Administration of Tribal Areas in the States of Assam, Meghalaya, Tripura and Mizoram 8. Powers to assess and collect land revenue and to impose taxes.— (1)… (2)… (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 — (a) taxes on professions, trades, callings and employments; (b) taxes on animals, vehicles and boats; (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. |
SIXTH SCHEDULE
[Articles 244(2) and 275(1)] Provisions as to the Administration of Tribal Areas in the States of Assam, Meghalaya, Tripura and Mizoram 8. Powers to assess and collect land revenue and to impose taxes.— (1)… (2)… (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 — (a) taxes on professions, trades, callings and employments; (b) taxes on animals, vehicles and boats; (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 ; and (e) taxes on entertainment and amusements. |
Powers to assess and collect land revenue and to impose taxes on entertainment and amusements has been vested on the District Council in relation to the Tribal Areas in the States of Assam, Meghalaya, Tripura and Mizoram.
Though taxes on entertainment & amusement have been subsumed into GST, however such taxes in respect of Tribal Areas in the States of Assam, Meghalaya, Tripura and Mizoram shall now be levied by The District Council of such area.
Also Entry no. 62 of List-II of the Seventh Schedule empowers the Panchayat or a Municipality or a Regional Council or a District Council to collect such taxes as state taxes. |
| 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. Note: Entry no. 92A List-I. Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce. 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.
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SEVENTH SCHEDULE
(Article 246) 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.”;
92. Omitted
92C. Omitted
List II—State List
52. Omitted
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.”;
55. Omitted
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.”.
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Some entries in the Seventh Schedule have been added, amended and removed to enable the Government to subsume various taxes under GST
Entry no. 84 of List-I is discussed in detail in next section of this article
Taxes on the sale or purchase of newspapers and on advertisements published therein have been subsumed into GST.
Service tax has also been subsumed into GST.
Purchase tax has also been subsumed into GST.
Entry no. 54 of List-II is discussed in detail in next section of this article
Taxes on advertisements other than advertisements broadcast by radio or television has also been subsumed into GST.
Luxury Tax has been subsumed into GST.
Tax on betting and gambling has also been subsumed into GST.
Right to levy Tax on entertainments and amusements has been restricted to Panchayat or a Municipality or a Regional Council or a District Council. |
Powers given to States & Union Government to levy & collect GST under Article 246A of the Constitution of India are subject to Article 246 & 254, so it means that power of the Union Government & State Governments to tax the goods or services covered in Schedule 7, shall be in addition to those covered by GST. To illustrate let us take an example of Entry no. 84 of List-I which gives power to Union Government to impose excise on following goods manufactured or produced in India:
(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.”;
So, these goods even if covered under GST, shall also be taxable under Union Excise. Similarly, entry no. 54 empowers the states to levy & collect 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 (other than sale in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods). So, these goods even if covered under GST, shall also be taxable under respective VAT Acts or State Excise Acts.
It is pertinent to note that alcoholic liquor for human consumption has specifically been kept out of GST regime by inserting the definition of GST under article 366(12A) in The Constitution of India, which read as “(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”. Also alcoholic liquor for human consumption does not find any reference in List-I of Seventh schedule, so it means that on supply of alcoholic liquor for human consumption only State Excise/VAT will be charged by the States for intra-state supplies in their respective states.
Also section 9(2) of CGST Act states that “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.”
Similarly section 5(2) of IGST Act state that “The integrated 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.”
So intention to levy GST on these item by the Government at a later stage is also very clear, however it does not means that once GST is levied on these items, they will come out of purview of Excise duty & VAT Tax, rather they will be then taxable under all the three Acts . To bring them out of Excise & VAT, again a Constitutional amendment will be required to amend the entry no. 84 of List-I & Entry no. 54 of List-II of The Seventh Schedule.
Tobacco and tobacco products are not mentioned in List-II of Seventh Schedule, and it has not been excluded from the levy under GST, so it means that both GST & Central Excise duty will be levied on Tobacco and tobacco products and VAT will not be levied on them.
For the sake of clarity we have given away these provisions in a tabular format as below:
|
Item |
Taxability of goods after implementation of GST | ||
| Whether taxable under GST | Under Central Excise Act | Under State Excise / Local VAT Act | |
| Petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel. | As of now not levied under CGST & IGST, but may be brought under tax at anytime by passing a notification. Under SGST it may be made taxable by states while passing their respective SGST Acts. | YES | YES |
| Tobacco and tobacco products. | YES | YES | NO |
| alcoholic liquor for human consumption | NO | NO | YES |
An important point here for discussion is that, as this amendment to the Constitution was approved by the Parliament and it came in effect w.e.f. 16th September 2016, so does it mean that the Government has lost the right to levy tax in regard to all the taxes subsumed under GST. For example in case of entry no. 84 of List-I which enables the Union Government to levy Excise duty on various goods manufacture in India, stands amended and now as per entry no. 84 Union Government may levy Excise duty on six goods only. So, what is the legal validity of Excise duties collected after this amendment? Similarly what would be the fate of the all the other taxes which are now not there in List-I or List-II?
Though, Union Government may cover-up this lacuna by giving reference to the residual entry no. 97, which is still there in List-I of The Seventh Schedule of The Constitution of India. This will definitely come to the rescue of the Union Government. But what will States do now? In my opinion, as of now states may take shelter of transitional provisions stated in section 19 of the Constitution (One Hundred and First Amendment) Act, 2016, which states as follows:
“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 in force until amended or repealed by a competent Legislature or other competent authority or until expiration of one year from such commencement, whichever is earlier.”
However, this section can cover-up the situation up to 15th day of September 2017 only, so what will happen in case GST is not levied till that date? Will States loose the power to levy those taxes which have been subsumed into GST? This Constitutional amendment has jeopardized the stand of States to tax various goods subsumed under GST, now they have to pass their respective State GST Bills otherwise they must keep themselves prepared for another amendment The Constitution of India.
Article by CA. Mithun Khatry
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Very informative article CA Mithun Khatry. Keep it up