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I. Introduction
“Gear up for Goods & Service
Tax”. This is the call given by our three associations – All India Federation of
Tax Practitioners (Western Zone), The Maharashtra Chamber of Commerce,
Industries & Agriculture, Pune and The Western Maharashtra Tax Practitioners,
Pune. However, our Ex-Finance Minister Mr. P. Chidambaram has been making this
call in his four budget speeches.
“Budget Speech 2004-05
Para 119 : Now I turn to my
indirect tax proposals ….. It is my intention to align India’s tariff
structure to those of ASEAN countries. Eventually, there should be a uniform
rate of tax on goods and services.”
“Budget Speech 2005-06
Para 94 : In the medium to
long term, it is my goal that the entire production – distribution chain
should be covered by a National VAT, or even better a goods and service tax,
encompassing both the Centre and State.”
“Budget Speech 2006-07
Para 155 : It is my sense
that there is large consensus that the country should move towards a national
level Goods and Service Tax (GST) that should be shared between the Centre and
the State. I propose that we set April 1, 2010 as the date for introduction of
GST. World over goods and services attract the same rate of tax. That is the
foundation of the GST. People must get used to the idea of GST. Hence we must
progressively converge the service tax rate and the CENVAT rate. …….”
“Budget Speech 2007-08
Para 116 : I wish to record
my deep appreciation of the spirit of co-operative federalism displayed by
State Governments and especially their Finance Ministers. At my request, the
Empowered Committee of State Finance Ministers has agreed to work with the
Central Government to prepare a roadmap for introducing a national level Goods
and Services Tax (GST) with effect from April 1, 2010.”
Thus the call for gearing up
is very clear. Now what is gearing up? In simple words, it is being prepared
for GST. It means that how different segments – Industries, Trading
Communities, Central Government, State Governments and you all would-be
practitioners of GST - should prepare for the smooth introduction and
operation of GST.
Before we list out segment
wise required preparations, we must know what happened after the initial
above-mentioned announcements and what sort of GST is being proposed.
The real work started with
the appointment of Joint Working Group (JWG) by the Empowered Committee of
State Finance Ministers to give recommendations regarding detailed framework
to be adopted for GST, in May 2007.
JWG was given the task to
suggest a model for the base and rate structure of GST. The working group was
instructed to keep the following in mind :–
a) GST should be so
designed that it should be revenue neutral to the Centre and States.
Interest of the Special Category, North Eastern State, and Union Territories
have to be especially kept in mind.
b) The group will examine
different models and see that power of levy, collection and appropriation of
revenue needs to be vested in the Centre and the States by looking at the
pros and cons.
c) The various models
suggested by the working group should ensure that double taxation is
avoided.
d) The working group would
ensure that the suggested model takes into account the problems faced during
inter state transactions and any revenue loss.
e) The working group should
consider how zero rated goods and services and non-VAT items such as
petroleum goods and alcohol might be treated under the new regime.
f) The model developed
should reflect the interest of the Centre, States, Trade, Industry,
Agriculture and Service Sector.
JWG submitted the report in
Oct. 2007 after making study of GST Act of several countries and making study
tours to Brazil, Australia and Singapore.
Before we look at their
recommendations briefly, let us understand in simple words as to WHAT IS IDEAL
GST?
GST is comprehensive value
added tax on goods and services. It is levied and collected on value addition
at each stage of sale or purchase of goods or supply of services based on
input tax credit method but without State boundaries. There is no distinction
between taxable goods and taxable services and they are taxed at a single rate
in a supply chain of goods and services till the goods / services reach the
consumer. The administrative power will be vested with a single authority to
levy tax on goods and services. The main features of GST are as under:-
a) It is based on the
principle of value added tax and either “input tax method” or “subtraction”
method, with emphasis on voluntary compliance and accounts based system.
b) Comprehensive levy and
collection on both goods and service at the same rate with benefit of input
tax credit or subtraction of value of penultimate transaction value.
c) Minimum floor rates of
tax, generally not exceeding two rates.
d) No scope for levy of
cess, re-sale tax, additional tax, special tax, turnover tax etc.
e) No scope for multiple
levy of tax on goods and services such as sales tax, entry tax, octroi,
entertainment tax, luxury tax, etc.
f) Zero rating of exports
and interstate sales of goods and supply of services.
g) Taxing of capital goods
and inputs whether goods or services relatable to manufacture at lower rate,
so as to reduce inventory carrying cost and cost of production.
h) A common law and
procedure throughout the country under one single administration.
The main advantages of
comprehensive Gst
a) Introduction of GST
would result in abolition of multiple types of taxes on goods and services.
b) Reduces effective rates
of tax to one or two floor rates.
c) Reduces compliance cost
and increases voluntary compliance.
d) Removes cascading effect
of taxation and removes distortion in the economy.
e) Enhances manufacturing
and distribution efficiency, reduces cost of production of goods and
services, increases demand and production of goods and services.
f) As it is neutral to
business processes, business models, organization structure, geographic
location, product substitutes, it will promote economic efficiency and
sustainable long-term economic growth.
g) Will give competitive
edge in international market for goods and services produced in India,
leading to increased exports.
h) Reduces litigation,
harassment and corruption.
i) Will result in widening
tax base and increased revenue to the Centre and State.
j) Reduces administrative
cost for the Government.
Now we will look at
recommendations of the working group Recommendations of the Joint Working
Group (JWG)
1. JWG has recommended a
dual GST. It means that there will be Central GST to be administered by the
Central Government and there will be State GST to be administered by State
Governments.
2. Central GST will replace
existing CENVAT and service tax and the State GST will replace State VAT.
3. Central GST should
subsume following indirect taxes on supplies of goods and services:-
-
Central excise duties and additional excise
duties levied on pan masala, petroleum and tobacco products and those
levied under Additional Duties of Excise (Goods of special importance)
Act, 1957.
-
Additional custom duties in the nature of
countervailing duties
-
CVD and other domestic taxes imposed on
imports to achieve a level playing field between domestic and imported
goods which are currently classified as customs duties.
-
Cesses levied by the union viz., cess on
manufactured bidis, rubber, tea, coffee and cess on unmanufactured
tobaccos.
-
Surcharges levied by the union viz.,
national calamity contingent duty, education cess, special additional
duties of excise on motor-spirit and high speed diesel (HSD).
4. State GST should
subsume following State taxes :-
• Purchase tax
• State Excise duty
• Entertainment tax
• Luxury tax
• Octroi
• Entry tax in lieu of octroi
• Taxes on lottery, betting and gambling
• Tax on consumption or sale of electricity
5. The proposed GST should
have two components – Central GST and State GST – the rates of which will be
prescribed separately keeping in view the revenue considerations, total tax
burden and the acceptability of the tax.
6. More than 40 services
are identified on which service tax should be levied/collected by States.
7. For the purpose of
assessment and administration of different assessees following categorization
has been recommended :-
• Gross turnover of goods
upto Rs. 1.5 cr should be assigned exclusively to the State;
• Gross turnover of services up to Rs. 1.5 cr should be assigned exclusively
to the Centre ; and
• Gross turnover of above Rs. 1.5 cr should be assigned to both the
Governments – for the administration of CGST to the Centre and for the
administration of SGST to the State.
8. Exports should be zero
rated and should be relieved of all embedded taxes and levies at both Central
and State level.
9. The JWG has also
proposed list for exempted goods which includes items such as life saving
drugs, fertilizers, agricultural implements, books and several food items.
2. Industries Expectations
Now we will move on to
industries expectations from different segments and then we will find out what
preparations are required for the same.
A. Expectation from the
Central & State Government – Gearing up by both Governments for GST
(a) Centre – State
interaction
Considering the federal
nature of our country and Centre – State relationships, Central Government
should be prepared to pass more powers of taxation to State and share more
revenue with the States if GST has to be successful.
(b) Constitutional
amendments
Under the scheme of our
constitution no tax can be levied without the authority of law. Power to
levy tax on goods and services are vested with both Central Government and
State Government under Article 246 and List-I and List-II of the VII
Schedule of the Constitution. Neither the Central Government nor the State
Government can usurp the powers of the others without amending several
provisions of the Constitution. Following Articles need to be amended by the
Parliament.
-
Article 246 – relating to subject matter of
laws made by Parliament and by the legislatures of the State – (See
Annexure A).
-
Article 269 – relating to taxes levied and
collected by the Union but assigned to the State – (See Annexure B)
-
Article 270 – relating to taxes levied and
distributed between the Union and the States – (See Annexure C)
-
Article 286 – relating to restrictions as to
imposition of tax on the sale or purchase of goods – (See Annexure D)
-
List-I & List-II of the VII Schedule of the
Constitution – some of the important entries - (See Annexure E)
-
Article 366 – important definitions (See
Annexure F)
(c) Re-engineering of
Central & State employees
There should be a thorough
re-engineering of the department of GST at Central level as well as State
level. This is very much required to clearly define, understand and
administer functions in such a way that the responsibility, accountability
and authority of each tax department at the Central and State level are
clearly understood.
(d) Single authority to
deal with
As it is known that number
of officials at Central level is less as compared to State level officials
it is expected that Central officials be assigned special task to monitor
the operations of large dealers (who have pan India operations) under CGST
and SGST. The day-to-day operations related to registration, payment of tax
and submission of returns for all the dealers (irrespective of their size)
should be assigned to the State. The assessees with specific turnover, say,
up to Rs. 500 cr and the assessees whose operations are limited to one State
only should be assessed by State Department for both CGST and SGST. In
general, the idea is that assessees should interact with one tax authority
only.
Presently, under the
recommendation of JWG, CGST will be monitored by the Central Government and
SGST will be monitored by the State Government. It means that the assessees
will have to deal with two authorities which may be unacceptable by all
dealers. Because from the past practical experience, everyone knows that
interpretations, procedures, whims and approach widely differ at both
levels. If this happens, then instead of helping, GST will create more
harassment and nuisance.
The above concept will be
discussed further while understanding about expected model of GST.
(e) Tax payment
Payment of CGST should be
made in the bank accounts of Central Government. Similarly payment of SGST
should be made in the bank accounts of State Government.
(f) Verification Agency
Cross verification of
documents should be strengthened under GST to avoid evasion and wrong
claims. In France, the Government has created organization called “National
Directorate of Verification” which verifies transactions above 300 million
Francs involving national and international dealings. Similarly, there is
Regional Directorate of Verification which verifies similar transactions
within the districts/divisions. Similar arrangements should be made under
GST regime also.
(g) Management
Information Services (MIS) amongst different Government Departments
MIS has to be an integrated
activity of the SGST and CGST offices as well as other Government
Departments. The integration of activities of SCST, CGST, customs and income
tax through PAN number, TINXYS should be an essential part of GST regime.
(h) Creation of IT
infrastructure – GST Public Services Offices (PSO)
Cross verification, MIS and
interaction between different departments and dealers necessitate complete
computerization of all Government departments in all States and as well as
availability of computer facility with each and every dealer covered under
GST. Even today it is observed that computers and internet facilities are
not easily available in villages and towns. Lack of knowledge of computer in
such areas is a hard reality. Therefore, there is a need to bring the
awareness about the computer amongst the dealers across India. In the
initial period of five years opening of Government sponsored kiosk at
various centres facilitating compliance of law through internet and
computers should be seriously considered. In fact, we are reminded of Mr.
Sam Pitroda who created the Centre for Development of Telematics (C-DOT), an
autonomous telecom R&D organization which made yellow signed Public Call
Offices (PCO) ubiquitous throughout India. In the same fashion we highly
expect that GST PSO (Public Service Offices) should be created in every
village in the form of computer kiosks.
(i) Training of Staff
Today excise and service
tax staff do not know much about VAT provisions. Similarly, State employees
administering VAT Act do not know excise and service tax provisions. Thus
both Central and State staff will require learning and training in the
administration of GST Act.
(j) Stability of GST Act
and rates
As recommended by Dr.
Kelkar, there should be entered an agreement between Central Government and
all State Governments that there should not be any change in the GST Act or
rates without concurrence of both Central and State Governments. This only
can lead to stability of GST Act and will give global reputation to Indian
continent.
The above gearing up for
GST by two tiers of Government is the industries expectations because it
will facilitate smooth introduction and operations of GST.
B. Expectation from the
GST Act
(a) Present lacuna to be
removed
Finance Ministers of all
States are jubilant because of the buoyancy in the collection of VAT revenue
and feel that by and large harmonization has been achieved in the VAT laws
throughout the country with deviation in rates being less than 3% of the
cases. However, we all know that everything is not right as far as dealers
are concerned. Following lacuna found in the present VAT laws should be
removed from the GST Act.
(i) Today we are finding
separate VAT laws in all States. There should be one GST Act applicable to
whole of India.
(ii) The description of
entries prescribing rate of tax is not uniform in present VAT laws which
results into same commodities being taxed differently in different States,
e.g. for the commodity Plant & Machinery following are the description in
Gujarat, Punjab and Maharashtra:
For Gujarat 4% + 1% Addl.
tax
Machinery (including
spare parts, accessories and components thereof) used in manufacture of
goods excluding domestic appliances (whether fitted or not with electric
motor) such as grinder, mixer, grinder-cum-mixer, juicer, blender, water
purifier, flour mill, toaster, oven, etc. (Please note that word “Plant”
is missing, which was deleted w.e.f. 1-4-2008).
Punjab 4%
Capital goods; i.e.,
Plant and Machinery and parts thereof but excluding the goods on the sale
of which a taxable person is not entitled for input tax credit under
sub-section 5 of section 13 of the Act.
Maharashtra 12.5%
No description for plant
and machinery at all and hence taxed as a residuary entry Under GST there
should be common schedules applicable in all States.
(iii) Input tax credit is
not given of the tax paid on each and every goods used as input. Different
States follow different rules in granting tax credit. Under the GST Act,
it is expected that all the tax paid on all inputs should be available for
adjustment against output tax. This only can bring removal of cascading
effect and one price pan India making entire India one national market.
(iv) The procedural
provisions relating to :-
• granting of
registrations
• preparation of bills
• filing of returns
• scrutiny of returns
• assessments
• granting of refund
• audit
• cross-verification
• appeal
• allowance of credit notes etc.
are different in
different States. Under GST Act, same procedural rules should be
prescribed for all States.
(v) While VAT was
implemented in most of the States w.e.f. 1-4-2005 and some of the States
like Gujarat w.e.f. 1-4-2006, the State machinery is still engrossed in
the pending work related to assessment, appeals etc. relating to previous
sales tax regime in all States. As a result, many officers are not well
equipped with the VAT laws, which is not desirable. Hence, it is highly
expected that when GST is planned to be implemented w.e.f. 1-4-2010, all
steps are taken to ensure that no pending work relating to either sales
tax, VAT or other indirect taxes remains outstanding so that everybody can
concentrate on the new law. It is therefore, suggested that some schemes
for summary disposal for all the pending cases should be pronounced before
GST comes into operation. In such schemes, the approach should be to lure
almost all the dealers to settle their all the disputes rather than
miserly offering schemes which do not help in achieving the objective of
the scheme.
(b) Fixation of revenue
neutral rate
The success of GST will
largely depend on the determination of ideal rate at Central level as well
as State level which should be acceptable by public and revenue neutral to
Government.
The golden rule for
collection of tax is given by world’s oldest economist Shri Kautilya alias
Chanakya Muni more than 1000 years ago. He said that the king should collect
tax from different persons as the bumble bee collects honey from different
flowers without making any harm to them. Thus all efforts should be made to
keep the GST rate as low as possible.
The standard rate of 16%
adopted for CENVAT (now first lowered to 14% then 12% and then 8% under
various schemes), along with residuary rate of VAT 12.5% brings the overall
rate to 28.5%, which is too high a rate compared globally. Some of the
global rates of GST as given below will be really an eye opener.
• Taiwan / Japan – 5%
• European Union (EU) – 19.5% (average)
• Organization for Economic Cooperation and Development (OECD) countries –
17.7%
• Asia Pacific countries – 10.8%
• South American countries – 14.2%
• Mexico – 15%
• Australia – 10%
• Canada – 6%
• Hong Kong / Bahrain – Nil
Thus according to us GST
rate may be kept at about 18% considering the fact that now CGST will also
be available on value added transactions which will enhance Government
revenue to a large extent.
(c) Inter-State
transactions
It is presumed that Central
Sales Tax will be phased out with the introduction of GST, but the levy of GST
on inter-State transactions will be there. Proper mechanism needs to be
introduced so that dealers get input credits for any GST levied on inter-State
transactions. Only this can avoid cascading effect in the real sense.
(d) GST model
There are four alternatives
in this context :-
• GST at Central Government
Level (Option I)
• GST at State Government Level (Option II)
• GST at both, Central and State Government Levels (Option III)
• One GST with allocation of dealers between Central and State (Option IV)
Canada has GST at Central
Level extending to all goods and services covering all stages of value
addition. In addition, there is tax at province (State) level in different
forms which include VAT, Retail Sales Tax and so on. European Union (EU)
nations (each one is independent nation but, part of a Union and have agreed
to adopt common principles for taxation of goods and services) have adopted
“classic” VAT. If we consider EU as a country equivalent and member nations as
State equivalents, EU has only State Level VAT with special rules for
intra-community (intermember state) transactions.
In Indian context, an
additional dimension is added by the provisions of Constitution which
specifically reserve power to impose tax on specific activities to specific
level of government e.g. tax on import of goods can be imposed by Union
Government only whereas tax on sale of goods involving movement of goods
within the State can be imposed by State Governments only.
Presently, Option III is
being recommended by JWG. We have made enough comments on the same in the
preceding paras.
However, our expectation is
Option IV, which will have following salient features :-
• Instead of there being
Central GST and State GST, there will one GST Act.
• Administration and
assessment is explained in detail in para A(d) above under the title “Single
authority to deal with”. We have also given the advantage of such
arrangement.
• It will be easy to
operate, interpret and monitor one Act to the advantage of both Government
as well as dealers.
(e) Motor Spirits, Naphtha
& Natural Gas
It is recommended by JWG
that no ITC will be available on purchase of petrol and diesel although
sales tax rates on these products are as high as 26% (& 25%) on petrol and
28% (& 26%) on diesel in Maharashtra, 23% on petrol and 21% on diesel in
Gujarat. In almost all States rates are very high and no ITC is available.
For industries if cost sheet is prepared for any product fuel and
transportation cost – direct and indirect will definitely form about 20% of
the total cost. Industries strongly expect that rates should be rationalized
or input tax credit should be made available to avoid unnecessary burden to
final consumers.
Similarly, on naphtha also
there is high rate e.g. in Maharashtra – 12.5% (with reduced input tax
credit) and in Gujarat – 16% + 2.5% = 18.5% (with no input tax credit), if
used as fuel. If used as raw material, input tax credit is available but
there will be accumulation of refund as end products are mostly taxable at
4%. And everybody knows that getting refund has its own administrative
issues. Thus it is highly expected that rate of tax should be reduced to 4%.
Similarly, natural gas is
taxable at 12.5% with the same issues as given in the case of naphtha.
Hence, its rate should also be reduced to 4%.
If we look globally, in
Australia GST rate is 10% on petroleum products and natural gas with
availability of input tax credit when used for business operations.
In Canada, GST rate is 6%
federal + 14% provincial with availability of input tax credit when used for
business operations.
In Singapore, rate is 7%
with availability of input tax credit when used for business operations.
In Sri Lanka, rate is 15%
for petrol and input tax credit is available when used for business
operations. Surprisingly diesel, kerosene, LPG, crude oil, ATF etc. are all
exempt.
Thus we strongly believe
that in India high rates of tax on petroleum products is one of the reasons
for high cost of final product which is to be borne by common man; i.e.,
consumers.
It is possible to reduce
rates and provide ITC under the GST regime because State Governments are
going to get additional income by way of service tax which will duly
compensate loss of revenue on petroleum products. Hence, industries expect
that rate on petroleum products must be rationalized and input tax credit
must be made available.
C. Expectation from
Practitioners
This is required of all the
persons present in this seminar and reading this paper who is practising in
VAT. Today, for expert advice on excise and service tax industry has to go
to different experts and for VAT to different experts. When all Acts are
going to be merged in one, it is high time that you all VAT experts also
take up study of excise and service tax and become GST expert. Many
Governments have opened single window where all queries pertaining to
development of industries are answered. Similarly, if we have one single
window; i.e., one GST expert answering all the queries, industries will be
very happy. Thus all practitioners also need to gear up for GST practice.
3. Gearing Up for Gst
• Central & State Governments
should gear up to the expectation of industries as listed above.
• Even industries need to be
geared up as they will have to reallocate and rearrange following activities:
(i) If separate departments are existing in
the companies to monitor excise, service tax and VAT, they all will have to
be merged in an amicable manner.
(ii) Record keeping will have to be changed
and IT software will have to be updated in order to comply with GST
provisions.
(iii) Teachings and trainings will be required
at all levels.
(iv) Industries will have to rethink about
their market strategies, stock transfer policies and godown keeping policies
in different States depending upon GST provisions.
4. Conclusion
In conclusion, we would like
to mention that globally GST is not a new concept. Today it has been operating
in more than 150 countries. Brazil introduced federal VAT replacing wholesale
tax and the State VAT replacing the State turnover tax in 1967. The tax base
for the federal VAT is industrial production. The tax base for the State VAT
includes all goods with the exception of some industrial products, imports,
agricultural inputs, food products and services. Agriculture, minerals and
services are excluded from tax.
Mexico implemented VAT regime
in 1980 to replace 30 federal excise taxes and 400 municipal and state taxes.
The tax base covers businesses connected with the sale of goods and services.
Mexico has uniform VAT rate and bases across the States and it follows the
destination principle. The tax may be regarded as a unified national VAT with
revenue sharing.
The European Union (EU) has
fully harmonized VAT since 1993. Initially, it was achieved through the
“approximation” of rates; i.e., by fixing a specified range within which VAT
rates could vary.
In Canada, GST was introduced
as back in August 1989. Then Minister of Finance Mr. Michael H. Wilson had
very aptly summarized “achievable expectations” from the introduction of GST
reproduced hereunder. You may note that we have replaced the word Canada with
the word India so that it can be better appreciated in Indian context.
“The Goods and Service Tax (GST)
is an integral part of the Government agenda for securing India’s economic
future. The Tax reform will achieve three important goals :-
• GST will contribute to
the deficit reduction efforts and ensure we can continue to pay for
(welfare) programmes and services Indians value.
• The GST is an essential
element of the Government plan to make the changes necessary to ensure that
India can compete effectively in the world economy.
• The GST will improve the
overall fairness of the tax system. Lower and modest income Indians will be
better off once the GST is in place.”
At the end if we want to
summarise industries expectations as to what GST should be like and what it
should bring to industry, trade and nation as a whole. I would like to quote
the Chairman of 13th Finance Commission, Dr. Vijay Kelkar who has always
pitched for the introduction of GST. He elaborates that :-
• A well designed
destination-based GST on all goods and services should be the most elegant
method of eliminating distortions and taxing consumption.
• Under this structure, all
different stages of production and distribution should be interpreted as a
mere tax pass-through, and the tax essentially `sticks’ on the final
consumption within the taxing jurisdiction.
• The introduction of GST
should also bring about a macroeconomic dividend, as it reduces the overall
incidence of indirect taxation and therefore, the overall tax burden by
removing many adverse features of the present sales tax system.
• The effective revenue
neutral rate at which GST can be implemented should be far lower than 30%
indicating a significant reduction in the effective tax burden on our
economic agents.
• The comprehensive GST
should fully eliminate the export of taxes and improve international
competition. This in turn, should help in increasing the production and
exports of labour-intensive manufacturers and also, boost employment in our
economy.
• Considering the high
level of distortions in the indirect tax system, one can argue that the real
output effect of a well implemented GST in India would be at least 1.4% of
the GDP in Canada. This amounts to $ 15 billion annually, implying that the
economic value of GST reforms would, at a modest 3% discount rate, be close
to half a trillion dollars or 50% of the country’s present GDP.
• More importantly, this
means potentially creating an additional productive employment for as many
as 4 to 5 million. The introduction of GST would also be a reform measure
whose economic impact will rival that of the elimination of licensing in
1991.
• The existing tax system
introduces myriad distortions which favour some goods and services at the
expense of others. Such distortions in our tax system are also adversely
affecting the growth for manufacturers, particularly labour-intensive
manufacturers, who are extremely important in meeting the challenge of
providing productive employment. This should be achieved by the introduction
of GST.
5. Last Punch
Industries expect only one
thing – Let GST Act be not only Goods & Service Tax Act but also GOOD &
SERVING-TAX ACT.
Article 246 Annexure A
Subject-matter of laws made
by Parliament and by the Legislatures of States
(1) Notwithstanding
anything in clauses (2) and (3), Parliament has exclusive power to make laws
with respect to any of the matters enumerated in List I in the Seventh
Schedule (in this Constitution referred to as the “Union List”).
(2) Notwithstanding
anything in clause (3), Parliament, and, subject to clause (1), the
Legislature of any State also, have power to make laws with respect to any
of the matters enumerated in List III in the Seventh Schedule (in this
Constitution referred to as the “Concurrent List”).
(3) Subject to clauses (1)
and (2), the Legislature of any State has exclusive power to make laws for
such State or any part thereof with respect to any of the matters enumerated
in List II in the Seventh Schedule (in this Constitution referred to as the
“State List”').
(4) Parliament has power to
make laws with respect to any matter for any part of the territory of India
not included in a State notwithstanding that such matter is a matter
enumerated in the State List.
Article 269 Annexure B
Taxes levied and collected by
the Union but assigned to the States —
(1) Taxes on the sale or
purchase of goods and taxes on the consignment of goods shall be levied and
collected by the Government of India but shall be assigned and shall be
deemed to have been assigned to the States on or after the 1st day of April,
1996 in the manner provided in clause (2).
Explanation.—For the
purposes of this clause,
(a) the expression "taxes
on the sale or purchase of goods" shall mean taxes on sale or purchase of
goods other than newspapers, where such sale or purchase takes place in
the course of inter-State trade or commerce;
(b) the expression "taxes
on the consignment of goods" shall mean taxes on the consignment of goods
(whether the consignment is to the person making it or to any other
person), where such consignment takes place in the course of interstate
trade or commerce.
(2) The net proceeds in any
financial year of any such tax, except in so far as those proceeds represent
proceeds attributable to Union territories, shall not form part of the
Consolidated Fund of India, but shall be assigned to the States within which
that tax is leviable in that year, and shall be distributed among those
States in accordance with such principles of distribution as may be
formulated by Parliament by law.
(3) Parliament may by law
formulate principles for determining when a sale or purchase of, or
consignment of, goods takes place in the course of interstate trade or
commerce.
Article 270 Annexure C
Taxes levied and distributed
between the Union and the States—
(1) All taxes and duties
referred to in the Union List, except the duties and taxes referred to in
Articles 268 and 269, respectively, surcharge on taxes and duties referred
to in Article 271 and any cess levied for specific purposes under any law
made by Parliament shall be levied and collected by the Government of India
and shall be distributed between the Union and the States in the manner
provided in clause (2).
(2) Such percentage, as may
be prescribed, of the net proceeds of any such tax or duty in any financial
year shall not form part of the consolidated Fund of India, but shall be
assigned to the States within which that tax or duty is leviable in that
year, and shall be distributed among those States in such manner and from
such time as may be prescribed in the manner provided in clause (3).
(3) In this article,
"prescribed" means, —
(i) until a Finance
Commission has been constituted, prescribed by the President by order, and
(ii) after a Finance
Commission has been constituted, prescribed by the President by order
after considering the recommendations of the Finance Commission.
Article 286 Annexure D
Restrictions as to imposition
of tax on the sale or purchase of goods.—
(1) No law of a State shall
impose, or authorise the imposition of, a tax on the sale or purchase of
goods where such sale or purchase takes place—
(a) outside the State; or
(b) in the course of the
import of the goods into, or export of the goods out of, the territory of
India.
(2) Parliament may by law
formulate principles for determining when a sale or purchase of goods takes
place in any of the ways mentioned in clause (1).
(3) Any law of a State
shall, in so far as it imposes, or authorises the imposition of,—
(a) a tax on the sale or
purchase of goods declared by Parliament by law to be of special
importance in interstate trade or commerce; or
(b) a tax on the sale or
purchase of goods, being a tax of the nature referred to in sub-clause
(b), sub-clause (c) or sub-clause (d) of clause (29A) of Article 366, be
subject to such restrictions and conditions in regard to the system of
levy, rates and other incidents of the tax as Parliament may by law
specify.
Annexure E
Some important entries in
Lists I and II as contained in the Seventh Schedule to the Constitution:
|
Movement or
Activity |
Levied by Centre
under Entry of List I of Seventh Schedule to the Constitution |
Levied by States
under Entry of List II of Seventh Schedule to the Constitution |
|
GOODS
|
|
|
|
Movement
|
|
|
|
Import into India |
83 [Duties of customs
including export duties] |
|
|
Export out of India |
83 |
|
|
Stock Transfer from a
State |
92B [Taxes on the
consign- ments of goods (whether the consignment is to the person
making it or to any other
person), where such consign-
ment takes place in the course of interstate trade or
commerce] |
|
|
Stock transfer to a
State |
92B |
|
|
|
|
|
|
Stock transfer to a
State Bring within the limits of a city etc. |
|
52 [Taxes on the
entry of goods into a local area for consumption, use or sale therein] |
|
Extraction/mining |
|
50 [Taxes on
mineral rights subject to any limitations imposed by Parliament by law
relating to mineral development.] |
|
Manufacture or
production |
84 [Duties of excise
on tobacco and other goods manufactured or produced in India except –
(a) alcoholic liquors for human consumption;
(b) opium, Indian hemp and other narcotic drugs and narcotics,
but including medicinal and toilet preparations containing alcohol or any
substance included in sub-paragraph (b) of this entry] |
51 [Duties of
excise on the following goods manufactured or produced in the state and
countervailing duties at the same or lower rates on similar goods
manufactured or produced elsewhere in India:-
(a) alcoholic liquors for human consumption;
(b) opium, Indian hemp and other narcotic drugs and narcotics,
but not including medicinal
and toilet preparations
containing alcohol or any
substance included in sub-
paragraph (b) of this entry] |
|
Sale Inter-State |
92A [Taxes on the
sale or
purchase of goods other than
newspapers, where such sale or purchase takes place in the course of
interstate trade or commerce] |
|
|
Sales within a State |
|
|
|
|
|
54 [Taxes on the sale
or purchase
of goods other than newspaper,
subject to the provisions of entry
92A of List I] |
|
Export sale |
83
|
|
|
Import sale |
83 [Duties of
customs including
export duties] |
|
|
Sale or purchase of
newspapers and advertisements therein |
92 [Taxes on the
sale or purchase of newspapers and
on advertisements published
therein] |
|
|
Consumption or sale
of electricity |
|
53 [Taxes on the
consumption or sale of electricity] |
|
Tax and advertise-ments
(other than newspapers) |
|
55 [Taxes on
advertisements other
than advertisements published in
the newspapers and advertisements
broadcast by radio or television.] |
|
Tax on vehicles |
|
57 [Taxes on
vehicles, whether
mechanically propelled or not,
suitable for use on roads, including
tramcars subject to the provisions
of entry 35 of List III] |
|
Animals and boats |
|
58 [Taxes on
animals and boats] |
|
SERVICES
|
|
|
|
Specific
|
|
|
|
Carriage of goods or
passengers by railway, air or sea |
89 [Terminal taxes
on goods or passengers, carried by railway, sea or air; taxes on railway
fares and freights] |
|
|
Railway fares and
freights |
89 [Terminal taxes on
goods or passengers, carried by railway, sea or air; taxes on railway
fares and freights] |
|
|
Transactions in stock
exchange and future markets |
90 [Taxes other
than stamp
duties on transactions in stock exchanges and futures markets]
|
|
|
Carriage of goods and
passenger by road or inland waterways |
|
56 [Taxes on goods
and
passengers carried by road or on inland waterways] |
|
Profession, trade and
callings and employment |
|
60 [Taxes on
professions, trades, callings and employments] |
|
Luxuries, enter-tainment,
amaze-ment, betting and gambling |
|
62 [Taxes on
luxuries, including
taxes on entertainments,
amusements, betting and
gambling] |
|
OTHERS
|
|
|
|
Within India |
92C/97 [Taxes on
Services/Any
other matter not enumerated in List II or List III including any tax not
mentioned in either of those Lists] |
|
|
Outside India
|
92C/97 |
|
|
From outside India
or import |
92C/97 |
|
Article 366 Annexure F
Definition –
In this Constitution, unless
the context otherwise requires, the following expressions have meaning hereby
respectively assigned to them, that is to say –
(12) 'goods' includes all
materials, commodities and articles;
(28) “taxation” includes the
imposition of any tax or impost, whether general or local or special, and
“tax” shall be construed accordingly;
(29-A) "tax on the sale or
purchase of goods" includes-
(a) a tax on the transfer,
otherwise than in pursuance of a contract, of property in any goods for cash,
deferred payment or other valuable consideration;
(b) a tax on the transfer of
property in goods (whether as goods or in some other form) involved in the
execution of a works contract;
(c) a tax on the delivery of
goods on hire-purchase or any system of payment by installments;
(d) a tax on the transfer of
the right to use any goods for any purpose (whether or not for a specified
period) for cash deferred payment or other valuable consideration;
(e) a tax on the supply of
goods by any unincorporated association or body of person to a member thereof
for cash, deferred or other valuable consideration;
(f) a tax on the supply, by
way of or as part of any service or in any other manner whatsoever, of goods,
being food or any other article for human consumption or any drink (whether or
not intoxicating), where such supply or service, is for cash, deferred payment
or other valuable consideration; and such transfer, delivery or supply of any
goods shall be deemed to be a sale of those goods by the person making the
transfer, delivery or supply and a purchase of those goods by the person to
whom such transfer, delivery or supply is made.
[Source: Paper presented at
Two Day National Tax Conference held on 5th and 6th June, 2009 at Pune.]
|