The Constitution (One Hundred and First Amendment) Act, 2016: A Review

The One Hundred and First Amendment of the Constitution of India, officially known as The Constitution (One Hundred and First Amendment) Act, 2016, introduced a national Goods and Service Tax (GST) in India from 1st April, 2017. The GST is a Value added Tax (VAT) and is proposed to be a comprehensive indirect tax levied on manufacture, sale and consumption of goods as well as services at the national level which will replace all indirect taxes levied on goods and services by a single tax on the supply, right from the manufacturer to the consumer.[1]

This Amendment Act, introduced as the one Hundred and Twenty-Second Amendment Bill, is the newest Amendment to the Constitution of India. There are three ways of amending the Constitution:

  • Bills passed by a simple majority
  • Bills passed by a special majority of 2/3rd of the members present and voting.
  • Bills passed by a special majority along with ratification of legislatures of ½ of the states.[2]

Since the present amendment to the Constitution also included amendments to Chapter I of Part XI and the Lists in the Seventh Schedule, under Article 368 (2) the latter mode of amendment was followed.

Amendments

The 101st Amendment Act inserts, repeals and amends certain parts of the Constitution.

 

The following Articles have been inserted

  1. Article 246A: (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.

Explanation.—The provisions of this Article, shall, in respect of goods and services tax referred to in clause (5) of Article 279A, take effect from the date recommended by the Goods and Services Tax Council.[3]

By this Article, the State Legislatures now have power to make individual laws with respect to GST imposed by the Centre and to make necessary arrangements for implementation of the same in intra-state trade, while the Centre has exclusive power to make GST laws in case of inter-state trade. Both the Union and States in India now have concurrent powers to make law with respect to goods & services.

  1. Article 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.[4]

In case of inter-state trade, the amount collected by the Centre is to be apportioned between the Centre and the States as per recommendations of the GST Council. 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. Such proceeds shall not form a part of the Consolidated Fund of India to avoid having to pass an Appropriation Bill every time a deposition is made.

  1. Article 279A. (1) The President shall, within sixty days from the date of commencement of the Constitution (One Hundred and First Amendment) Act, 2016, by order, constitute a Council to be called the Goods and Services Tax Council.

(2) The Goods and Services Tax Council shall consist of the following members, namely:—

(a) the Union Finance Minister…………………… Chairperson;

(b) the Union Minister of State in charge of Revenue or Finance…………….. Member;

(c) the Minister in charge of Finance or Taxation or any other Minister nominated by each State Government………………..Members.

(3) The Members of the Goods and Services Tax Council referred to in sub-clause (c) of clause (2) 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.

(4) The Goods and Services Tax Council shall make recommendations to the Union and the States on—

(a) 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;

(b) the goods and services that may be subjected to, or exempted from the goods and services tax;

(c) model Goods and Services Tax Laws, principles of levy, apportionment of Goods and Services Tax levied on supplies in the course of inter-State trade or commerce under Article 269A and the principles that govern the place of supply;

(d) the threshold limit of turnover below which goods and services may be exempted from goods and services tax;

(e) the rates including floor rates with bands of goods and services tax;

(f) any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster;

(g) 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

(h) any other matter relating to the goods and services tax, as the Council may decide.

(5) The Goods and Services Tax Council shall recommend the date on which the goods and services tax be levied on petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel.

(6) While discharging the functions conferred by this Article, the Goods and Services Tax Council shall be guided by the need for a harmonised structure of goods and services tax and for the development of a harmonised national market for goods and services.

(7) One-half of the total number of Members of the Goods and Services Tax Council shall constitute the quorum at its meetings.

(8) The Goods and Services Tax Council shall determine the procedure in the performance of its functions.

(9) Every decision of the Goods and Services Tax 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, namely:—

(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.

(10) No act or proceedings of the Goods and Services Tax Council shall be invalid merely by reason of—

(a) any vacancy in, or any defect in, the Constitution of the Council; or

(b) any defect in the appointment of a person as a Member of the Council; or

(c) any procedural irregularity of the Council not affecting the merits of the case.

(11)The Goods and Services Tax Council shall establish a mechanism to adjudicate any dispute —

(a) between the Government of India and one or more States; or

(b) between the Government of India and any State or States on one side and one or more other States on the other side; or

(c) between two or more States, arising out of the recommendations of the Council or implementation thereof.[5]

This Article provides for the constitution of a GST Council along with its powers and positions. The process of decision-making also has to be taken through voting.

The following Article has been repealed

Article 268A of the Constitution, as inserted by Section 2 of the Constitution (Eighty-eighth Amendment) Act, 2003 relating to Service tax levied by Union and collected and appropriated by the Union and the States.

The following Articles have been amended

  1. The residuary power of legislation of Parliament under Article 248 is now subject to Article 246A.
  2. 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 also in national interest.
  3. Article 250 has been amended so that the Parliament will have powers to make laws related to GST during emergency period.
  4. 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.
  5. Article 269 would empower the Parliament to make GST related laws for inter-state trade / commerce.
  6. Article 270 now provides for collection and distribution of tax to be done according to Article 246A.
  7. Currently under Article 271, GST has been exempted from being part of the Consolidated Fund of India.
  8. Article 286 has been amended to include supply of goods and/or services under its ambit than just sale or purchase of goods.
  9. Article 366 now includes the definitions of Goods and Service Tax, Services and State.
  10. Article 279A has also been brought under the ambit of Article 368.[6]

The following schedules have been amended-

  1. The Sixth Schedule has been amended to give power to the District Councils to levy and collect taxes on entertainment and amusements. (para 8, sub-para3)
  2. The Seventh Schedule has been amended thus-
    1. In the Union List, petroleum crude, high speed diesel, motor spirit (petrol), natural gas, and aviation turbine fuel, tobacco and tobacco products have been removed from the ambit of GST and have been subjected to Union jurisdiction. Newspapers, advertisements, and Service Tax have been brought under GST. (entries 84, 92, 92C)
    2. In the State List, petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption have been included, except where the sale is in course of inter-State or International trade and commerce. Entry tax and Advertisement taxes have been removed. Taxes on entertainment only to be included to the extent of that imposed by local bodies. (entries 52, 54, 55, 62)

Compensation and Transition

Upon recommendation by GST Council, the Parliament will provide compensation to the States in case of any loss due to implementation of GST upto five years. However no redressal against the advice or decisions of the GST council has been provided to the States. Special powers have been given to the president to make such necessary adaptations and modifications by order within a period of three years for removing any difficulty that may arise.

Finally for the transitional period, it has been provided that laws inconsistent with the above provisions shall continue to be in force until repealed by the legislature, or until a year has lapsed, whichever is earlier.


Bibliography

[1] F. Lourdunathan & P. Xavier, A study on implementation of goods and services tax (GST) in India: Prospectus and challenges, 3(1) INTERNATIONAL JOURNAL OF APPLIED RESEARCH 626, 626-627 (2016)

[2] THE CONSTITUTION OF INDIA (Sep. 19, 2017, 16:10 AM), http://www.Constitution.org/cons/india/p20368.html

[3] Ministry of Law and Justice (Legislative Deptt.), The Constitution (One Hundred and First Amendment) Act, 2016, II THE GAZETTE OF INDIA, Sep 8, 2016, at pp. 1-2.

[4] Supra 3, at pg. 2

[5] Supra 3, at pp. 3-4

[6] Supra 5


References

  1. Lourdunathan & P. Xavier, A study on implementation of goods and services tax (GST) in India: Prospectus and challenges, 3(1) INTERNATIONAL JOURNAL OF APPLIED RESEARCH 626, 626-627 (2016)
  2. THE CONSTITUTION OF INDIA, http://www.constitution.org/cons/india/p20368.html
  3. Ministry of Law and Justice (Legislative Deptt.), The Constitution (One Hundred and First Amendment) Act, 2016, II THE GAZETTE OF INDIA, Sep 8, 2016, at pp. 1-2.

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