Statement of Objects and Reasons - Constitution (101st Amendment) Act, 2016

Statement of Objects and Reasons 1. The Constitution is proposed to be amended to introduce the goods and services tax for conferring concurrent taxing powers on the Union as well as the States including Union territory with Legislature to make laws for levying goods and services tax on every transaction of supply of goods or services or both. The goods and services tax shall replace a number of indirect taxes being levied by the Union and the State Governments and is intended to remove cascading effect of taxes and provide for a common national market for goods and services. The proposed Central and State goods and services tax will be levied on all transactions involving supply of goods and services, except those which are kept out of the purview of the goods and services tax. 2. The proposed Bill, which seeks further to amend the Constitution, inter alia, provides for ( a ) subsuming of various Central indirect taxes and levies such as Central Excise Duty, Additional Excise Duties, Excise Duty levied under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, Service Tax, Additional Customs Duty commonly known as Countervailing Duty, Special Additional Duty of Customs, and Central Surcharges and Cesses so far as they relate to the supply of goods and services; ( b ) subsuming of State Value Added Tax/Sales Tax, Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States), Octroi and Entry tax, Purchase Tax, Luxury tax, Taxes on lottery, betting and gambling; and State cesses and surcharges in so far as they relate to supply of goods and services; ( c ) dispensing with the concept of declared goods of special importance under the Constitution; ( d ) levy of Integrated Goods and Services Tax on inter-State transactions of goods and services; ( e ) levy of an additional tax on supply of goods, not exceeding one per cent in the course of inter-State trade or commerce to be collected by the Government of India for a period of two years, and assigned to the States from where the supply originates; ( f ) conferring concurrent power upon Parliament and the State Legislatures to make laws governing goods and services tax; ( g ) coverage of all goods and services, except alcoholic liquor for human consumption, for the levy of goods and services tax. In case of petroleum and petroleum products, it has been provided that these goods shall not be subject to the levy of Goods and Services Tax till a date notified on the recommendation of the Goods and Services Tax Council; ( h ) compensation to the States for loss of revenue arising on account of implementation of the Goods and Services Tax for a period which may extend to five years; ( i ) creation of Goods and Services Tax Council to examine issues relating to goods and services tax and make recommendations to the Union and the States on parameters like rates, exemption list and threshold limits. The Council shall function under the Chairmanship of the Union Finance Minister and will have the Union Minister of State in charge of Revenue or Finance as member, along with the Minister in-charge of Finance or Taxation or any other Minister nominated by each State Government. It is further provided that every decision of the Council shall be taken by a majority of not less than three-fourths of the weighted votes of the members present and voting in accordance with the following principles: (A) the vote of the Central Government shall have a weightage of one-third of the total votes cast, and (B) the votes of all the State Governments taken together shall have a weightage of two-thirds of the total votes cast in that meeting. Illustration In terms of clause (9) of the proposed Article 279-A, the weighted votes of the members present and voting in favour of a proposal in the Goods and Services Tax Council shall be determined as under: WT = WC+WS Where, Wherein WT = Total weighted votes of all members in favour of a proposal. WC = Weighted vote of the Union = i.e., 33.33% if the Union is in favour of the proposal and be taken as 0 if, Union is not in favour of a proposal. WS = Weighted votes of the States in favour of a proposal. SP = Number of States present and voting. WST = Weighted votes of all States present and voting i.e. , i.e., 66.67% SF = Number of States voting in favour of a proposal. ( j ) Clause 20 of the proposed Bill makes transitional provisions to take care of any inconsistency which may arise with respect to any law relating to tax on goods or services or on both in force in any State on the commencement of the provisions of the Constitution as amended by this Act within a period of one year. 3. The Bill seeks to achieve the above objects.