news round up - Taxmann

124 GOODS & SERVICES TAX - MAGAZINE [Vol. 1
sale or purchase of goods whereas the States can levy tax on sale of goods
only.
The present system has grown into a complex tax structure involving
multiple authorities. And in order to provide a transparent system for
operational ease, the reform process that has been initiated long back has
emerged for the introduction of a new system.
Proposed GST
3. 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 paper elaborates the
system of dual GST, the manner of its application, its coverage besides
containing details on several aspects of the tax.
The GST to be introduced would have dual GST system as decided by the
Government with two components Central GST (CGST) and a State
GST(SGST) simultaneously levied by Centre and State, respectively, on all
transactions of ‘goods and services’ with exception to those provided for
by law.
The paper also mentions that GST would subsume
(a) the Central taxes - Central excise duty, additional excise duties, the
excise duty levied under the Medicinal and Toiletries Preparation
Act, service tax, additional customs duty or countervailing duty,
special additional duty of customs on imports, surcharges, and cess,
Central sales tax and service tax.
(b) the States taxes - VAT/Sales tax, entertainment tax (unless it is levied
by the local bodies), luxury tax, Taxes on lottery, betting and gambling,
State cess and surcharges, entry tax/octroi.
Constitutional Amendment - A necessity
4. 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 an 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.
To explain, the Constitution provides for delineation of power to tax
between the Centre and States. While the Centre is empowered to tax
services and goods up to the production stage, the States have the power
to tax sale of goods. The States do not have the powers to levy a tax on
supply of services while the Centre does not have power to levy tax on the
sale of goods. Thus, the Constitution does not vest express power either in
the Central or State Government to levy a tax on the ‘supply of goods and
services’. Moreover, the Constitution also does not empower the States to
impose tax on imports. Therefore, it is essential to have constitutional
GOODS & SERVICES TAX CASES ❑ JANUARY 20 - FEBRUARY 4, 2010 ◆ 34