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122 GOODS & SERVICES TAX - MAGAZINE [Vol. 1 CONSTITUTIONAL AMENDMENT - A PREREQUISITE FOR GST The Empowered Committee of State Finance Ministers on November 10, 2009 unveiled the contours of the proposed GST in its ‘First Discussion Paper on Goods and Services Tax in India’. The launch of the new system requires preparation and constitutional amendment is one of the few important and emergent needs for smooth rollout. It is considered necessary because with GST in place, there would be unified tax-‘tax on goods and services’ and the discrete jurisdiction of the Centre and States to levy tax would ipso facto merge, which the Constitution does not provide for. As the Constitution does not vest express power either in the Central Government or State Governments to levy tax on the ‘supply of goods and services’ and also does not empower the States to impose tax on imports, it becomes essential to have constitutional amendments for empowering the Centre to levy tax on sale of goods and States for levy of service tax and tax on imports and other consequential issues. CA. GEETA DAS Our Constitution and Levy 1. India has a three-tier federal structure comprising of the Union Government, the State Governments and the Urban/Rural Local Bodies. The Constitution of India elaborately lays down the framework, defines the fundamental rights, directive principles, the structure, powers and duties of the Government including the power to levy taxes distributed among the three tiers of the Governments of the Constitution, article 246 of the Constitution of India enlists three different lists, namely, the List I (Union List), List II (State List) and List III (the Concurrent List). In accordance with the provisions of the article, the Parliament enjoys the exclusive powers to make laws with respect to any of the matters enumerated in the Union List; the Legislature of any State has the exclusive power to make law for the respective State or any part thereof with respect to the matters enumerated in the State List. And insofar as the Concurrent List is concerned, the Parliament and the State Legislatures both have the power to make laws with respect to any of the matters enumerated in List III. GOODS & SERVICES TAX CASES ❑ JANUARY 20 - FEBRUARY 4, 2010 ◆ 32
2010] CONSTITUTIONAL AMENDMENT - A PREREQUISITE FOR GST 123 The relevant entries from the Lists with regard to imposition of tax are mentioned below :— - Entry 83 of List I empowers the Central Government to put duty of customs including export duties. - Entry 84 of List I empowers the Central Government to charge duty of excise on tobacco and other goods manufactured or produced in India. - Entry 92 of List I empowers the Central Government to charge taxes on service within India, outside India or from outside India or import. - Entry 92A of List I empowers the Central Government to charge tax on sale or purchase of goods other than newspaper, where such sale or purchase takes place in the course of inter-State trade or commerce. - Entry 92C of List I empowers the Central Government to tax services under the Finance Act, 1994. - Entry 54 of List II empowers the State Government to charge tax on the sale or purchase or goods other than newspaper, subject to the provisions of Entry 92A of Union List. Article 286 of the Constitution of India states that no law of a State shall impose, or authorize the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place outside the State or in course of the import of goods into, or export of goods out of the territory of India. The Constitution, thus, gives majority power to the Central Government to collect revenue and fewer powers have been vested in the State Government. As per the present allocation of jurisdiction in the Constitution, it is estimated that the Central Government collects 62 per cent of the revenue in the country while the States collects only 38 per cent of it. Power to levy at present 2. In accordance with the power vested with the Centre and State under the Constitution, the Centre and States are levying tax as below :— � Central Excise, Customs Duty, Central Sales Tax and Service Tax by the Centre, and � VAT/Sales tax, Entertainment tax, Luxury tax, by the States. Since the introduction of service tax in 1994, it is imposed under Entry 97 of List I. It is residuary in nature. Entry 92C was introduced by 88th Constitution Amendment in 2003 and the Central Government has exclusive jurisdiction over the same. Thus, presently the Centre has the power to impose a broad spectrum of excise duties on manufacture, customs duty, tax on services, inter-State GOODS & SERVICES TAX CASES ❑ JANUARY 20 - FEBRUARY 4, 2010 ◆ 33
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