ARTICLES ON GST INDIA

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GOODS AND SERVICES TAX COUNCIL OF INDIA


      India is a federal country. As on today, it has 29 States and 7 Union Territories. Each State has its Legislature to make laws for the State on the matters in respect of which the Constitution of India allows so. Out of 7 Union Territories, National Capital Territory of Delhi and Puducherry have their own Legislatures.
       Earlier to enactment of the Constitution (One Hundred and First Amendment) Act, 2016, the Constitution has permitted the State Legislatures to make laws for levy and collection of certain indirect taxes. It has also permitted the Parliament to make laws for levy and collection of certain indirect taxes apart from direct taxes. Where sale of goods took place within the State, tax was levied on such sales by the States under the Laws enacted by the State Legislatures. States were free to fix their own rates and procedures for levy of tax. They were also free to do so in respect of other taxes in respect of which their Legislatures have powers to make Laws. There was no Statutory Body to control them in these matters. Various States had levied tax on sale of same goods at different rates.
      Purpose of levy of goods and services tax (hereinafter referred to as the GST) had been to subsume so many goods and services related taxes levied by the Union and the States in a single tax and to provide harmonised structure of goods and services tax for the development of a harmonised national market for goods and services. This needed constitutionally empowered institution consisting of representatives from the Union and all States to express their concerns about GST matters relating to the Union and their State and to participate in the decision making process related to implementation of GST and matters those may arise thereafter. This necessitated creation of Goods and Services Tax Council of India. For this purpose, a new Article 279A was inserted in the Constitution.
       Article 279A of the Constitution, inserted in the Constitution by the Constitution (One Hundred and First Amendment) Act, 2016, relates to Goods and Services Tax Council (hereinafter referred to as the GST Council). This article provides for constitution of GST Council by the President, procedure to be adopted by the Council for taking decisions and the GST related matters on which the Council shall make recommendations to the Union and States. The said Article runs as follows:
‘‘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 onethird of the total votes cast,
(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.’’.
       Article 279A of the Constitution of India provides that the President shall order for constitution of a Council called Goods and Services Tax Council. Clause (2) of the Article provides that the Union Finance Minister will be the Chairperson of the Council and members of the Council shall be as follows:
(i) the Union Minister of State in charge of Revenue or Finance; and
(ii) the Minister in charge of Finance or Taxation or any other Minister nominated by each State Government.
       Clause (3) of the said Article provides that the Members of the Goods and Services Tax Council shall choose one amongst themselves to be the Vice-Chairperson of the Council for such period as they may decide. Clause (4) of the Article relates to duties of the Council. The said clause (4) runs as follows:
(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.
       Clause (5) of the Article requires the Council to make its recommendation about the date with effect from 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.
       Clause (6) of the Article provides that while discharging the functions conferred by this article, the 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. Clause (7) prescribes that one-half of the total number of members of the Council shall constitute the quorum at Council's meetings. Clause (8) empowers the Council for determining the procedure in performance of its functions.
       Clause (9) of the said article 279A prescribes how a decision shall be taken by the Council. The said clause (9) runs as follows:
"(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."
       Clause (10) of the article that any act or proceedings of the Council shall not be invalid for a 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.
Clause (11) of the Article provides that the 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
(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.’’.
      Presently, there are 29 States and 7 Union Territories of India. Out of seven Union Territories, two Union Territories, viz. National Capital of Delhi and Puducherry, have their Legislatures. According to clause (26B) of Article 366, the word “State” with reference to articles article 279A includes a Union territory with Legislature;’. In view of this, in accordance with provisions of clause (2) of Article 279A, the GST Council shall have One Chairperson and 32 members. According to clause (6), One-half of the total number of members, i.e. one-half of 32, which is 16, shall be the quorum at meeting of the Council.       According to clause (9), a decision of the 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 and for this purpose, weightage of votes shall be as follows:
(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.
Example: Let us suppose that Council calls a meeting for deciding "the threshold limit of turnover below which goods and services may be exempted from goods and services tax". Twenty-six members of the Council attend the meeting. The Secretary of the Council welcomes the Chairperson and the Members and thereafter, expresses his views on the importance and implications of "the threshold limit of turnover". He informs the house that the Union Government is of the view that for States other than Special Category States, annual turnover of supply of goods or services or both of twenty five lakh rupees be fixed as "the threshold limit of turnover below which goods and services may be exempted from goods and services tax". On the suggestion, various State members express their own views. Some of them do not express any view. Out of the members who express their views, 4 members are not in favor of fixing such limit of turnover of 25 lakh rupees. In their view such limit of 25 lakh rupees is too high. In their opinion limit of 10 lakh rupees may be fixed. Some members are of the view that limit of 25 lakh can reasonably be fixed. Suppose,─
(a) Number of members, including member of the Union Government, present in the meeting is 27;
(b) Number of persons who do not express their views on the issue is 8;
(c) Number of members who are in favor of fixing limit of 25 lakh rupees is 13 ; and
(c) Number of persons who are in favor of fixing limit of 10 lakh rupees is 6.
      Suppose, the house, without going for voting, wants to take decision. Then we can assume that the vote of the member, who has agreed with limit of 25 lakh rupees, is in favor of such limit and the member who disagrees with such limit of 25 lakh rupees, is against the limit of turnover of 25 lakh. Rest members who have not expressed any view may be considered as members present but not voting. Let the number of members, for the purpose of clause (9) of Article 279A of the Constitution be as follows:
(i) Total strength of the house = 32;
(ii) Total number of members present =27;
(iii) Members present and who cast their vote in favor the limit of 25 lakh rupees =13 (includes Union Government member);
(iv) Members present and cast their vote against the proposed limit of 25 lakh rupees =6 ;
(v) Total number of members who were present and who cast their vote (iii + iv) = 19;
(vi) Members who were present but did not cast vote =8.
      As per clause (7) of Article 279A, quorum at the meeting is 16 (One-half of the total strength of the house). Therefore, quorum is complete. Now clause (9) of the said Article requires that decision in favor of the issue may be taken by a majority of not less than three-fourths of the weighted votes of the members present and voting. Here number of such persons is 19. Clause (9) provides that weightage of vote of member of Union Government shall be One-third of total votes cast and two-third weightage will be of all votes cast by members of States. If total weightage of all cast votes is 100, then weightage of the member of Union Government will be 100/3 i.e 33.33. Remaining weightage of 200/3 belongs to 18 members of the States who cast vote. Therefore, average weightage of one State Member will be 200/(3*18) which gives 3.70. Here we can compute the weightage of members who cast their vote in favor of the issue by multiplying (number of votes in favor of issue) and average weightage of vote. This will give us, (12 *3.70 i.e. 44.40), the total weightage of State members who cast their vote in favor of issue.
      Weightage, of all votes cast in favor of the proposal will be obtained by adding weightage of Union vote and all State votes which were cast in favor of the decision. This will come out to be 33.33 + 44.40 = 77.77. Three-fourth weightage of all cast vote is 100 *3/4 that is 75. Since the weightage of votes cast in favor of proposal is greater than the three-fourth wightage of all cast vote, thererfore decision shall be taken in favor of fixing threshold limit of annual turnover of 25 lakh rupees.
      On the basis of drafts Model GST Laws, prepared by the GST Council, States Legislatures have made the State Goods and Services Tax Act, 2017 for their States and the Parliament has made following Laws:
(i) The Central Goods and Services Tax Act, 2017;
(ii) The Union Territory Goods and Services Tax Act, 2017;
(iii) The Integrated Goods and Services Tax Act, 2017; and
(iv) The Goods and Services Tax (Compensation to States) Act, 2017.
       All these laws require the GST Council to give its recommendations on various provisions of the Laws. Amendments can be made on recommendation of the Council. Rules under these Laws have also been made by the respective Governments on recommendations of the GST Council. Their amendment is also subjected to recommendation of the Council.
 

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