Download Constitution (122nd Amendment) Act, 2014 and its Salient features

Union Finance Minister Shri Arun Jaitley Intoduces the Constitution Amendment Bill on Goods and Services Tax (GST) in Lok Sabha;

New Article 246a Proposed to Confer Simultaneous Power to Union and State Legislatures to Legislate on GST ;

Centre To Compensate States for Loss of Revenue Arising on Account of Implementation of the GST for a period up to Five Years

The Union Cabinet approved on 17th December,2014 the proposal for introduction of a Bill in the Parliament for amending the Constitution of India to facilitate the introduction of Goods and Services Tax (GST) in the country. The Union Finance Minister Shri Arun Jaitley introduced the said Bill in the Lok Sabha today.

The proposed amendments in the Constitution will confer powers both to the Parliament and State legislatures to make laws for levying GST on the supply of goods and services in the same transaction.

GST will simplify and harmonise the indirect tax regime in the country. GST will broaden the tax base, and result in better tax compliance due to a robust IT infrastructure. Due to the seamless transfer of input tax credit from one state to another in the chain of value addition, there is an in-built mechanism in the design of GST that would incentivize tax compliance by traders. It is thus, expected that introduction of GST will foster a common and seamless Indian market and contribute significantly to the growth of the economy.

Following are the salient features of this Bill:

• A new Article 246A is proposed which will confer simultaneous power to Union and State legislatures to legislate on GST.

• A new Article 279A is proposed for the creation of a Goods & Services Tax Council which will be a joint forum of the Centre and the States. This Council would function under the Chairmanship of the Union Finance Minister and will have Ministers in charge of Finance/Taxation or Minister nominated by each of the States & UTs with Legislatures, as members. The Council will make recommendations to the Union and the States on important issues like tax rates, exemptions, threshold limits, dispute resolution modalities etc.

• It is proposed to do away with the concept of ‘declared goods of special importance’ under the Constitution.

• Centre will compensate States for loss of revenue arising on account of implementation of the GST for a period up to five years. A provision in this regard has been made in the Amendment Bill (The compensation will be on a tapering basis, i.e., 100% for first three years, 75% in the fourth year and 50% in the fifth year).

The proposed GST has been designed keeping in mind the federal structure enshrined in the Constitution and will have the following important features:

• Central taxes like Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty (CVD) and Special Additional Duty of Customs (SAD), etc. will be subsumed in GST.

• At the State level, taxes like VAT/Sales Tax, Central Sales Tax, Entertainment Tax, Octroi and Entry Tax, Purchase Tax and Luxury Tax, etc. would be subsumed in GST.

• All goods and services, except alcoholic liquor for human consumption, will be brought under the purview of GST. Petroleum and petroleum products have also been Constitutionally brought under GST. However, it has also been provided that petroleum and petroleum products shall not be subject to the levy of GST till notified at a future date on the recommendation of the GST Council. The present taxes levied by the States and the Centre on petroleum and petroleum products, i.e., Sales Tax/VAT, CST and Excise duty only, will continue to be levied in the interim period.

• Both Centre and States will simultaneously levy GST across the value chain. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State.

• The Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supply of goods and services. There will be seamless flow of input tax credit from one State to another. Proceeds of IGST will be apportioned among the States.

• GST is a destination-based tax. All SGST on the final product will ordinarily accrue to the consuming State.

• GST rates will be uniform across the country. However, to give some fiscal autonomy to the States and Centre, there will a provision of a narrow tax band over and above the floor rates of CGST and SGST.

• It is proposed to levy a non-vatable additional tax of not more than 1% on supply of goods in the course of inter-State trade or commerce. This tax will be for a period not exceeding 2 years, or further such period as recommended by the GST Council. This additional tax on supply of goods shall be assigned to the States from where such supplies originate.


CA Sumit Grover commented on the bill “whether immovable property can be classified as services? It shall enlarge the scope for unnecessary invitation to litigation right from the beginning. Hence, these points should be taken for re-consideration as well to plug the ambiguities from the very first step.”

Download the Constitution (One Hundred and Twenty-second Amendment) Act, 2014.

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  1. A.S.ALAHARAJAN says:

    We the Traders and General public wants very very simple tax, do not categories or classifie it. Only three categories (a) FOOD CLOTHINGS 2% (b) all other items except food and and clothings 10% (c) export 5% . AT the point of manufacturing place Goverment should collect what ever the taxes they wish to collect so there will not be any tax evading when it comes to market no traders need to collect the tax so the buyer will happlie buy with out paying any tax , he does not know the taxes and rate of taxes levied on the goods like petrol and diesel nobody knows what are the taxes they paid The bill will show nett rate.And for inter state transactions once the all taxes collected and shared to the respective states no need for lot of formalities

  2. S K Nayak says:

    GST is a composite Tax and what will be the percentage of Tax (Both for CGST & SGST). It should not exceed current VAT rate of A State, unless it will be extra burden for end user.

  3. Amit says:

    Does it mean states can still impose “Entry tax” when the crude is acquired by refineries for processing and refining?
    Do States still has the liberty to impose additional “Surcharge” on VAT of petroleum products?

  4. R.Chandrakanthan says:

    Why we should change the name as GST as in small countries like Singapore,Newzeland,Australia or Canada?Why can’t we call it as VAT as in developed countries of European Union? We may better call it as Central VAT and State VAT and the preamble of the Act may simply mention as VAT on Goods and Services. Instead of sharing GST equally,Centre and State are creating dual levies causing hardship and inconvenience to lakhs of traders in general and numerous small manufacturers (below Rs 1.5 Crore) in particular.Unless the model Act evolved by the Centre is adopted uniformly by the States,there will be different provisions and schedules (with different rates within the band) in States as in the past.The State VAT Act will continue to have a long tail of Notifications granting tax exemptions and reductions,apart from peculiar procedures!It will be old wine in new bottle,with some more power to levy tax on services in addition to software,restaurants,works contracts,hire purchase etc.

  5. Gangadharan Nair says:

    If you analyze minutely, by introducing GST nobody is going to benefit. It is in the interest of a fight between two BANKRUPTED INSTITUTIONs, Central & State Governments over the collection of taxes. By the introduction of GST as proposed the Central Government will have more share of Taxes in the country. The GST system does NOT address the FRAUDS & AVOIDANCE of TAX occuring in Liquor trade and Petroleum trades. These are left with States and lot of corruption is being taken place. Taxes on these items are very very high and because of that maximum illegal transactions are taking place in that. 2/3 of liquor being sold in the market illegally and taxes are not paid. NOTHING is addressed. So one thing is clear it is NOT meant for any body’d convenients but for the benefit of central government.

  6. CA Bhavesh Mange says:

    GST would reduce the litigation & all the complexity of levy of VAT & Service tax on Softwares, Restaurant, Works contract, Hire Purchase transactions etc.

    It will be a great relief to all the above Assesses . However, GST should be kept very simple & Straight forward without involving complex jargons & definitions .

  7. Abdur Razzaque says:

    It means there will be no VAT (Direct tax) to consumer on purchase of items from the shop or Service tax on telephone bills etc will be charged from the consumer.

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