GST: Overview of the new taxation regime
Sohini Chowdhury [LL.B from New Law College, Bharati Vidyapeeth Deemed University, Pune]

GST: Overview of the new taxation regime

Posted by : Sohini Chowdhury [LL.B from New Law College, Bharati Vidyapeeth Deemed University, Pune]

The Goods and Services tax (for short "GST") is a Value added Tax (or short "VAT") proposed to be a comprehensive indirect tax to be levied on manufacture, sale and consumption of goods as well as services at the national level replacing all the current indirect taxes levied on goods and services by the Indian Central and State governments. The taxes which will be subsumed into GST include central excise duty, services tax, additional customs duty, surcharges and state-level value added tax. Other levies which are currently applicable on inter-state transportation of goods are also likely to be done away with in GST regime. In the year 2000, under Atal Bihari Vajpayee administration an empowered committee was set up to streamline GST Model and the infrastructure needed for its implementation. In 2006, another empowered committee of State Finance Ministers (for short "EC") was formed after the budget speech of P. Chidambaram, the then finance Minister since the transition into GST involved reforming/restructuring of not only indirect taxes levied by the Central but also the States. Thus, the responsibility of preparing a Design and Road Map for the implementation of GST was assigned to the EC and in 2009 after inputs from Government of India (for short "GoI") and the states it released its First Discussion Paper on GST in India with the objective of generating a discussion amongst all stakeholders.

A dual GST module for the country has been proposed by the EC. This dual GST model has been accepted by centre. Under this model GST have two components viz. the Central GST to be levied and collected by the Centre and the State GST to be levied and collected by the respective States. Further, in order to take the GST related work further, a Joint Working Group consisting of officers from Central as well as State Government was constituted which is sub-divided into three groups to work separately on the following:

1. Drafting legislation required for GST;

2. Process/forms to be followed in GST regime;

3. IT infrastructure development needed for smooth functioning of proposed GST.


The Constitution (One Hundred and First Amendment) Act, 2016 (for short "2016 Amendment Act"), would come in force from 1 July 2017 and the significant changes brought to the Constitution is discussed below. Significant amendments in the Constitution

Insertion of Article 246 A

This Article empowers the legislature of every state to make laws with respect to GST imposed by the Union or by such State notwithstanding Section 245 and 246. Further, exclusive power to Parliament has been given in case of inter-State trade or commerce.

It's for the first time a power to make laws has been given other than by way of list given under Seventh Schedule. Article 269 was also amended in lines with this Article.

Insertion of Article 269 A

This Article was inserted to empower the GST Council on whose recommendation GoI can levy and collect taxes on supplies in course of inter-State trade or commerce according to the manner provided by the Parliament.

Amendment to Article 271

This Article was brought to curtail the power of Parliament to impose surcharge over and above taxes as regards to GST imposed under Article 246.

Amendment to Article 286

This Article substitutes the phrase "sale or purchase" to "supply" besides adding services along with goods. By this Article Parliament reserves the power to formulate principles as to when a supply may be said to be inter-State or in course of export or import.

Amendment to Article 366

This Article is a definition clause and clause 12 A has been added after the said amendment to define GST to mean "any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption". Similarly "services" have also been defined by Clause 26 A. it is also to be noted that "state" with reference to Article 246A, 268, 269, 269A and 279A has also been defined to include a Union territory with Legislature.

Amendment to the Seventh Schedule

Under the Union List, Clause 84 has been substituted to add duties on certain goods manufactured in India viz. petroleum crude, high speed diesel, petrol, natural gas, aviation turbine fuel and tobacco and tobacco products.

Under the State list, Clause 52 regarding taxes on the entry of goods into a local area for consumption, use or sale therein has been omitted. Similarly Clause 55 regarding taxes on advertisements other than the ones published in newspapers, radio and television has also been omitted. Article 54 has been substituted which allows state to collect taxes on the sale of petroleum crude, high speed diesel, petrol, natural gas, aviation turbine fuel and alcoholic liquor for human consumption, but not including sale in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods.

Meanwhile, the Constitution (122nd Amendment) Bill, 2014 was introduced in Lok Sabha on December 2014 by the current Finance Minister. The said Bill was passed by Lok Sabha on May 6, 2015 and referred to a Select Committee of Rajya Sabha which submitted its Report on the Bill and such Bill, taking the Report into consideration, was passed with amendments in Rajya Sabha on August 3, 2016. The significant difference from the 2016 Amendment Act is that an additional tax of up to 1% on the supply of goods will be levied by centre in the course of inter-State trade or commerce to be assigned to he States from where the supply originates has been scrapped. Other clauses regarding Dispute resolution, Replacement of the term Integrated Goods and Services tax (for short "IGST") and inclusion of Central goods and services tax (for short "CGST") and IGST.

About MCO Legals

MCO Legals, a division of Meharia & Company Advisors LLP provides complete legal solution with its extensive legal research, innovative approach and a commitment to provide quality and efficient services to its clients. The contribution made by the Firm, makes it one of the leading law firms with branches at New Delhi, Kolkata and Mumbai.