Constitution 101st Amendment Act, 2016
There are several articles in the constitution of India which define the financial relations between Union and States. Since GST bills involve a huge interest of the state governments, such a historical tax reform cannot take place without making suitable changes into the constitution. For this purpose, 101st amendment of the constitution was passed. This act received the assent of the President of India on 8th September, 2016. The important changes made in constitution (new articles / amended articles) via this law are as follows:
Article 246 (A)
This is a new article inserted in the constitution. It says that (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.
Notable Points from Article 246A
For your examinations, you must the below points clearly from this article:
- Both Union and States in India now have “concurrent powers” to make law with respect to goods & services
- The intra-state trade now comes under the jurisdiction of both centre and state; while inter-state trade and commerce is “exclusively” under central government jurisdiction.
This is a new article which reads as follows:
269A. (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.’
Notable Points from Article 269A
- This article says that in case of the inter-state trade, the tax will be levied and collected by the Government of India and shared between the Union and States as per recommendation of the GST Council.
- The article also makes it clear that the proceeds such collected will not be credited to the consolidated fund of India or state but respective share shall be assigned to that state or centre. The reason for the same is that under GST, where centre collects the tax, it assigns state’s share to state, while where state collects tax, it assigns centre’s share to centre. If that proceed is deposited in Consolidated Fund of India or state, then, every time there will be a need to pass an appropriation tax. Thus, under GST, the apportionment of the tax revenue will take place outside the Consolidated Funds.
This article provides for constitution of a GST council by president within sixty days from this act coming into force. The GST council will constitute the following members:
- Union Finance Minister as chairman of the council
- Union Minister of State in charge of Revenue or Finance
- One nominated member from each state who is in charge of finance or taxation
The GST council will be empowered to take decisions on the following:
- The taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the goods and services tax;
- The goods and services that may be subjected to, or exempted from, the goods and services tax;
- Model Goods and Services Tax Laws, principles of levy, apportionment of Integrated Goods and Services Tax and the principles that govern the place of supply;
- The threshold limit of turnover below which goods and services may be exempted from goods and services tax;
- The rates including floor rates with bands of goods and services tax;
- Any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster;
- Special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, 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.
All decisions taken at the GST council will be taken based on voting. Process of voting is clearly articulated in detail in the constitutional amendment bill.
Changes in the 7th Schedule
This amendment has made following changes in 7th schedule of the constitution:
- The entry 84 of Union List earlier comprised the duties on tobacco, alcoholic liquors, opium, Indian hemp, narcotic drugs and narcotics, medical and toilet preparations. After this amendment, it will comprise of Petroleum crude, high speed diesel, motor spirit (petrol), natural gas, and aviation turbine fuel, tobacco and tobacco products. Thus, these are now out of ambit of GST and subject to Union jurisdiction.
- Entry 92 (newspapers and on advertisements published therein) has been deleted thus, they are now under GST.
- Entry 92-C (Service Tax) has been now deleted from union list.
- Under State list, entry 52 (entry tax for sale in state) has been deleted.
- In Entry 54, Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of Entry 92-A of List I.; has been now replaced by 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.”
- Entry 55 (advertisement taxes) have been deleted.
- Entry 62 (Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling) has been replaced by these taxes only to be levied by local governments (panchayats, municipality, regional council or district council.
Other Important amendments in existing articles
- The residuary power of legislation of Parliament under article 248 is now subject to article 246A.
- Article 249 has been changed so that if 2/3rd majority resolution is passed by Rajya Sabha, the Parliament will have powers to make necessary laws with respect to GST in national interest.
- Article 250 has been amended so that parliament will have powers to make laws related to GST during emergency period.
- Article 268 has been amended so that excise duty on medicinal and toilet preparation will be omitted from the state list and will be subsumed in GST.
- Article 268A has been repealed so now service tax is subsumed in GST.
- Article 269 would empower the parliament to make GST related laws for inter-state trade / commerce.
Further, the amendment also provided that Parliament shall, by law, on the recommendation of the Goods and Services Tax Council, provide for compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for a period of five years. This resulted into the Compensation Cess Bill.[Download Bare Act]
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