Ashok Kumar Chopra

The  101 Constitutional Amendment Bill 2016 which is very popularly known as 122nd Constitutional Amendment Bill as passed by Rajya Sabha on 3rd August 2016 after waiting for more then a year when it was sent to it for passage. Certainly this day has become a red letter day in the history of Indian Tax reform as with the passing of this bill, the process of much awaited biggest reform  in the history of Indian Tax System has speeded up.

The bill could not get clearance in Rajya Sabha in the past because the opposition ,which has majority there , was demanding certain provisions to be incorporated in the 122nd Constitutional Amendment Bill.

Given below is the gist of the demands :

  1. There should be maximum cap of Goods and Service Tax rate of 18% incorporated in the Constitution itself.
  2. The provision of 1% additional tax which is intended to be levied and collected by Central Government on interstate trade and commerce and is to be assigned to the states from where supply originated as provided in the 122th Constitutional amendment bill 2014 should  be removed as this tax would spur cascading effect and would be against the spirit of GST concept.
  3. The central Government must compensate the states for loss of revenue on account of introduction of GST for five years .
  4. There must be a separate system to adjudicate disputes among union and state or among states arising out of recommendation of GST council.

After several rounds of talks between government and opposition, finally consensus had reached. By making suitable provisions for the following in the 122nd Constitution Amendment bill ,The Government accepted to:

  1. Remove the provision of 1% additional tax on inter state supply of goods and services from the bill.
  2. Compensate States for loss of revenue for five years by making provision in the Constitution for the same.
  3. Empower GST Council to set up a system to adjudicate disputes among union and state or states  or among states arising out of recommendation of GST council.
  4. Make provision for IGST collected by the Central Government will not form a part of Consolidated Fund OF India .

The opposition gave up the demand of cap of 18% GST rate as it was not a practical demand.

Amended Constitutional bill as passed by Upper House was also passed by Lower House on 8th of August 2016. After obtaining ratification in 17 states assemblies , the President gave his assent to the bill on 8th Sept 2016. Thereafter on 15th of September 2016 GST council was constituted [Notification no. S.O. 2957 (E) . The GST council had already held two meetings and will continue to meet frequently to decide about various aspects of GST to make it a  reality from 1st April 2017.

One of major steps towards this journey will be passing of CGST and IGST Acts in the parliament and SGCT Acts in every state and UT. At the center , Opposition  has demanded the government not to introduce CGST and IGST bills as money bills and want to have these as Finance Bills. Now the question arises as to whether the CGST and IGST bills will be introduced as money bills or Finance Bills.

This can be summed up from going through the contents relating to Money Bill as given in the  Article  110 of the Constitution of India.

Money Bills are those bills which contains the provisions  on the matter listed in article  110. These matters are reproduced as under :

(1) For the purposes of this Chapter, a Bill shall be deemed to be a Money Bill if it contains only provisions dealing with all or any of the following matters, namely

(a) the imposition, abolition, remission, alteration or regulation of any tax;

(b) the regulation of the borrowing of money or the giving of any guarantee by the Government of India, or the amendment of the law with respect to any financial obligations undertaken or to be undertaken by the Government of India;

(c) the custody of the consolidated Fund or the Contingency Fund of India, the payment of moneys into or the withdrawal of moneys from any such Fund;

(d) the appropriation of moneys out of the consolidated Fund of India;

(e) the declaring of any expenditure to be expenditure charged on the Consolidated Fund of India or the increasing of the amount of any such expenditure;

(f) the receipt of money on account of the Consolidated Fund of India or the public account of India or the custody or issue of such money or the audit of the accounts of the Union or of a State; or

(g) any matter incidental to any of the matters specified in sub clause (a) to (f)

(2) A Bill shall not be deemed to be a Money Bill by reason only that it provides for the imposition of fines or other pecuniary penalties, or for the demand or payment of fees for licenses or fees for services rendered, or by reason that it provides for the imposition, abolition, remission, alteration or regulation of any tax by any local authority or body for local purposes

(3) If any question arises whether a Bill is a Money Bill or not, the decision of the Speaker of the House of the People thereon shall be final

(4) There shall be endorsed on every Money Bill when it is transmitted to the Council of States under Article 109, and when it is presented to the President for assent under Article 111, the certificate of the Speaker of the House of the People signed by him that it is a Money Bill

Since GST pertains to imposition of new tax, it clearly falls under article 110 (1) (a). However Article 110 (2) contains that  the decision of the Speaker the house of People on the issue of whether a bill is a money bill or not shall be final.

What if these bills are treated as money bill.  What will happen in Parliament when these will be introduced for passage ? In Lok Sabha , there will likely to be easy passage of the CGST and IGST bills .But what is expected to happen in Upper House where the opposition has majority. Can Rajya Sabha block the passage of these bills ?

The answer lies in the fact that if any bill, which contains any one or more of the matters listed in Article 110, is introduced by the  Government , is treated as money bill . Since GST  will be a  new legislation for imposing tax on supply of Goods and Services all over the country , the two bills one for CGST and other for IGST are  expected to be introduced as money bills.

If these bills are introduced as a money bills , the constitutional provision is that such bills cannot be blocked in Rajya Sabha . Rajya Sabha has limited powers on money bills. It can neither reject nor amend these. It can make its recommendations only and has to return such  bills to Lok Sabha. Lok Sabha may or may not accept such recommendations and the returned bills are considered passed in both the houses of Parliament and after obtaining Presidential assent becomes  an Act.

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4 responses to “Likely Status of GST Bill – Whether Money Bill or Finance Bill?”

  1. vswami says:

    May Add:
    The original framers of the Constitution, in their exemplary wisdom, seem to have considered it necessary, hence made a distinction between the two concepts of ‘money bill’ and ‘finance bill’. Even then, in their overriding anxiety, thought fit hence provided how in the event of a ‘tie’ , that should be resolved. That has been done by vesting the power with the Speaker to resolve a stalemate.

    In a matter of personal viewing, perhaps, in the changed circumstances, it is time to give a serious thought to- as to whether or not such a distinction between ‘money bill’ and ‘finance bill’ is no longer to be preserved but calls for rethinking and if so decided, an ‘updating’; so as to suit the desirable and undesirable societal changes taken place, alike. In doing so, the principle of ‘UPDATING CONSTRUCTION’ – conceptually intended to apply only for the judiciary as an aid for ‘interpretation’ of any law, may have to be extended, and summoned for help and finding an appropriate solution.

  2. vswami says:

    IMPROMPTU

    The Bill, as understood by one, has already passed through that crucial stage of receiving assent by both the Houses, and its status is finally known; in that, the controversy raised, unwittingly or otherwise, it is believed, has to be taken to have been given a quietus.
    If so, and on that premise, the common expectation now, of THE PEOPLE, is that it would be introduced for enactment in its final form, only after striving the best and ensuring that the final text is foolproof and safeproof enough, so as to serve the avowed laudable objectives of the legislation; more so, through proper implementation and effective enforcement.

    To be precise, the common expectation is that, before that is done, the draft code has been rid of the several ‘deficiencies’, lacunae, etc. Those are quite obvious to discerning minds, hence been brought to surface during the public discussions and debates and given publicity, in the well-informed and knowledgeable circles; in particular, by the enlightened law experts.
    No need to stress, that is now entirely in the hands of the expert committee, whose special recommendations are expected to serve the indicated purpose.

  3. anshuman says:

    You have to admire the foresight of the authors of the Constitution. They have ensured that the functioning of the Government will not stop due to the whims and fancies of Rajya Sabha, which is after all a place to accommodate people who were not able to get elected by the people, directly.

  4. Sankha Banerjee says:

    The concept of money bill is a bit peculiar, as apparently Rajya Sabha does not have any power on money bills, and once approved in Lok Sabha it becomes an Act. Therefore,Rajya Sabha can only make recommendations. Even such recommendations may not have any value, as Lok Sabha may or may not accept.

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