AMENDMENT OF CONSTITUTION FOR GOODS AND SERVICES TAX

[Mr. M. GOVINDARAJAN]

The long awaited amendment of Constitution for the purpose of goods and services tax has got the assent of the President on 08.09.2016 and also published in the Official Gazette. It is called as the Constitution (One Hundred and First Amendment) Act,2016 (‘Act’ for short).

Effective date

The Act has not come into effect immediately on the date of publication in the Official Gazette. Section 1(2) of the Act provides that the Act shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint, and different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the commencement of that provision.

Special provisions with respect to goods and services tax

Section 2 of the Act inserts a new Article 246A.  The newly inserted Article 246A (1) provides that notwithstanding anything contained in articles 246 (Subject matter of laws made by Parliament and by the legislatures of the States) and 254  (Inconsistency between laws made by the Legislatures of State), 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.   Article 246A(2) provides that the 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.

The explanation to this Article provides that the provisions of Article 246A, shall, in respect of goods and service tax referred to Article 279A(5), take effect from the date recommended by the Goods and Services Tax Council.

Amendment to Article 248

Section 3 of the Act proposes amendment in Article 248.  After amendment Article 248(1) reads as follows-

Article 248 (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.  Article 248 (2) – Such power shall include the power of making any imposing a tax not mentioned in either of those Lists.

Amendment to Article 249

Article 249 deals with the power of Parliament to legislate with respect to a matter in the State List in the national interest.  Section 4 of the Act proposes amendment in Article 249.  After amendment Article 249(1) reads as follows-

Article 249 (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 the 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.

Amendment to Article 250

Article 250 deals with the power of Parliament to legislate with respect to any matter in the State List if a Proclamation of emergency is in operation.  Section 5 of the Act proposes amendment in Article 250.  After amendment Article 250 (1) reads as follows-

Article 250(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 goods and services tax provided under Article 246A or any of the matters enumerated in the State List.

Amendment to Article 268

Article 268 deals with duties levied by the Union but collected and appropriated by the States.  Section 6 of the Act proposes amendment in Article 268.  The amendment proposes some deletion of some words.  After amendment Article 268  reads as follows-

Article 268 (1) Such stamp duties as are mentioned in the Union List shall be levied by the Government of India but shall be collected-

• In the case where such duties are leviable within any 226 (Union territory)
• in other cases, by the States within which such duties are respectively leviable.

268 (2) - The proceeds in any financial year of any such duty leviable within any State shall not form part of the Consolidated Fund of India, but shall be assigned to that State.

Omission of Article 268A

Article 268A deals with service tax levied by Union and collected and appropriated by the Union and States.  Section 7 of the Act proposes to omit this Article 268A.

Amendment to Article 269

Article 269 deals with taxes levied and collected by the Union but assigned to the States.  Section 8 of the Act proposes amendment to Article 269.  The amended Article 269 (1) reads as follows-

Article 269 (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 States on or after the 1st day of April, 1996 in the manner provided in clause (2).

New Article 269A

Section 9 of the Act proposes to insert a new Article 269A after Article 269.  The newly inserted Article 269A provides for levy and collection of goods and services tax in course of inter-state trade or commerce.

Article 269A(1) provides that 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.

The explanation to this clause provides that 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.

Article 269A(2) provides that the amount apportioned under clause (1) shall not form part of the Consolidated Fund of India.  Article 269A(3) provides that where an amount collected as tax levied 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. Article 269A (4) provides that 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.  Article 269A(5) provides that the 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 places in the course of inter-State trade or commerce.

Amendment to Article 270

Article 270 deals with distribution of revenues between the Union and States.  Section 10 of the Act proposes amendments in Article 270.  After amendment Article 270 (1) reads as follows-

Article 270 (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).

The newly inserted clauses are-

Article 270(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).

Article 270(1B) -  The tax levied and collected by the Union and 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).

Amendment to Article 271

Article 271 deals with surcharge on certain duties and taxes for the purpose of the  Union.  Section 11 of the Act proposes amendment in Article 271.  After amendment Article 271 reads as follows-

Article 271 - Notwithstanding anything in articles 269 and 270, Parliament may at any time increase any of the duties or taxes referred to 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 of the Consolidated Fund of India.

Goods and Services Tax Council

Section 12 of the Act proposes to insert a new Article 279A after Article 279 which deals with Goods and Service Tax Council.

Constitution of GST council

Article 279A (1) provides that the President shall, within 60 days from the date of the commencement of the Act, by order, constitute a Council to be called the Goods and Services Tax Council. Article 279A(2) provides that the GST council shall consist of the following members-

• Union Finance Minister – Chairperson;
• The Union Minister of State in charge of Revenue or Finance- Member;
• The Minister in charge of Finance or Taxation or any other Minister nominated by each State Government – Members.

The members shall, as soon as may be, choose one amongst themselves to be the Vice Chairperson of the Council for such period as they may decide.

Functions of GST Council

Article 279A (4) provides that GST council shall make recommendations to the Union and the States on-

• the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be submitted in the goods and services tax;
• the goods and services that may be subject to, or exempted from the goods and services tax;
• model Goods and Services Tax Laws, principal of levy, apportionment of Goods and Services Tax levied on applies in the course of inter-State trade or commerce under Article 269A and the principles that govern the place of supply;
• the threshold limit of turnover below which goods and services may be exempted from the goods and services tax;
• the rates including floor rates with bands of goods and services tax;
• special provisions with respect to the States of Arunachal Pradesh, Assam, J&K, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and
• any other matter relating to the goods and services tax, as the Council may decide.

Article 279A (5) provides that the Council shall recommend the date on which the GST be levied on petroleum crude, high speed diesel, motor spirit, natural gas and aviation turbine fuel.

While discharging the functions, the Council shall be guided by the need for a harmonized structure of GST and for the development of a harmonized market for goods and services.  The Council shall determine the procedure in the performance of its functions.

Proceedings of Council

Every decision of the Council shall be taken at a meeting 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-

• the vote of the Central Government shall have a weightage of one third of the total votes cast; and
• the votes of all the State Governments taken together shall have a weightage of two thirds of the total votes cast in that meeting.

50% of the total number of Members of the Council shall constitute the quorum of the meeting.

No act or proceedings of the Council shall be invalid merely by reason of-

• any vacancy in, or in any defect in, the constitution of the Council; or
• any defect in the appointment of a person as a Member of the Council; or
• any procedural irregularity of the Council not affecting the merits of the case.

Adjudication of dispute

The Council shall establish a mechanism to adjudicate any dispute-

• between the Government of India and one or more States; or
• between the Government of India and any State or States on one side and one or more other States on the other side; or
• between two or more States

arising out the recommendations of the Council or implementation thereof.

Amendment of Article 286

Article 286 deals with the restrictions as to imposition of tax on the sale of purchase of the goods.  Section 13 of the Act proposes amendments in Article 286.  After amendment Article 286 reads as follows:

Article 286 (1) - No law of a State shall impose, or authorize the imposition of, a tax on the supply of goods or of services or both, where such supply takes place-

• outside the State; or
•  in the course of the import of the into, or export of the goods out of, the territory of India.

Article 286 (2) - Parliament may by law formulate principles for determining when a supply of   goods or services or both  takes place in any of the ways mentioned in clause (1).

Amendment of Article 366

Article 366 gives definition for some words.  Section 14 of the Act proposes insertions of some clauses under this Article.  Clause (12A) is proposed to be inserted after clause (12).  The newly inserted clause (12A) defines the term ‘goods and services tax’ as any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption.

Section 14 proposes to insert clause (26A) and (26B) after clause (26).  Clause (26A) defines the term ‘services’ as anything other than goods.   Clause (26B) defines the term ‘State’, with reference to articles 246A, 268, 269, 269A and 279A including a Union territory with Legislature.

Amendment of Article 368

Article 368 deals with the power of Parliament to amend Constitution and procedure there for.  Section1 15 of the Act proposes to amend Article 368 by substituting the figures and letters ‘article 162, article 241 or article 279A’ shall be substituted for the words and figures ‘article 162 or article 241’ in clause (a) of the proviso to Section 368 (2).

Amendment of sixth schedule

Sixth schedule deals with the provisions as to the administration of Tribal areas in the States of Assam, Meghalaya, Tripura  and Mizoram.   Para 8 of the schedule schedule deals with deals with the powers of the Regional Councils to assess and collect land revenue and impose taxes.  Section 16 of the Act proposes to insert clause (e) after clause (3) (d) .  After this para 8(3) reads as follows-

(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;

(d) taxes for the maintenance of schools, dispensaries or roads.; and

(e) taxes on entertainment and amusements.

Amendment of seventh schedule

Seventh Schedule deals with the three types of List viz., Union List, State List and Concurrent List.  Section 17 of the Act proposes to substitute the following for the existing entry in Union List-

84. Duties of excise on the following goods manufactured or produced in India, namely-

• Petroleum crude;
• High speed diesel;
• Motor spirit (commonly known as petrol);
• Natural gas;
• Aviation turbine fuel; and
• Tobacco and tobacco products.

The Act further proposes to omit entries 92 (Taxes on the sale or purchase of newspapers and on advertisements published therein) and 92C.

The Section further proposes to substitute the following for the existing entry 54 in the State List-

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.

The section further proposes to substitute the following for entry 62 in the State List-

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.

The section proposes to delete the following entries-

• Entry No. 52 – Taxes on the entry of goods into a local area for consumption, use or sale therein.
• Entry No. 55 - Taxes on advertisements other than advertisements published in the newspapers and advertisements broadcast by radio or television.

Compensation to States for loss

Section 18 of the Act provides that Parliament shall, by law, on the recommendations of the GST Council, provide for compensation to the States for loss of revenue arising on account of implementation of the goods and service tax for a period of five years.

Transitional provisions

Section 19 of the Act provides that 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 a mended or repeated by a competent Legislature or other competent authority or until expiration of one year from such commencement whichever is earlier.

Power to remove difficulties

Section 20 gives powers to the President to remove difficulties.  If any difficulty arises in giving effect to the provisions of the Constitution as amended by this Act (including any difficulty in relation to the transition from the provisions of the Constitution as they stood immediately before the date of assent of the President to this Act to the provisions of the Constitutions as amended by this Act), the President may, by order, make such provisions, including any adaptation or modification of any provision of the Constitution as amended by this Act or law, as appear to the President to be necessary or expedient for the purpose of removing the difficulty.  No such order shall be made after the expiry of three years from the date of such assent.    Every order shall, as soon as may be after it is made, be laid before each House of Parliament.

Discussions to this article

[Ganeshan Kalyani]

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