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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
2010] CONSTITUTIONAL AMENDMENT - A PREREQUISITE FOR GST 125 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. It is essential to have constitutional amendments for empowering the States for levy of service tax, GST on imports and consequential issues as well as corresponding Central and State legislations with associated rules and procedures. Article 368 of the Constitution provides that amendments to the provisions of Constitution can take place :— � By special majority of the Parliament: Amendments can be made in this category by a two-thirds majority of the total number of members present and voting, which should not be less than half of the total membership of the house. � Approval by special majority of the Parliament and ratification by at least half of the State Legislatures by special majority. � After this, it is sent to the President for his assent. Conclusion 5. A joint working group has already been constituted on September 30, 2009 to prepare, in a time-bound manner, a suitable legislation for constitutional amendment for levying CGST and SGST including model rules and procedures for CGST and SGST. The Government proposes to introduce the GST Bill in the present winter session of the Parliament and the industry, trade and business look forward to the new GST regime in operation. 13-GST GOODS & SERVICES TAX CASES ❑ JANUARY 20 - FEBRUARY 4, 2010 ◆ 35
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