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In the first & the second posts the shortcomings in the proposed amendment to the Indian Constitution for introduction of goods and services tax in India by The Constitution (115th Amendment) Bill, 2011 have been discussed and analysed . In this sequel some further analysis of the GST Bill is made. For a proper appreciation of this analysis the first two parts of the critical analysis should be looked into.
PART 3:
The Transitional Provision in section 18 of the GST Bill has been introduced to take care of the problems that may arise owing to delay in implementing the Central and State GST legislations after the effective date of the Constitutional Amendment. It actually gives a breather for one year and provides as follows:
"Notwithstanding anything in this Act, any provision of any law relating to tax on goods or services or on both in force in any State immediately before the commencement of this Act, which is inconsistent with the provisions of the Constitution as amended by this Act shall continue to be in force until amended or repealed by a competent Legislature or other competent authority or until expiration of one year from such commencement, whichever is earlier."
Comments:
(a) The Transitional Provision refers to "tax on goods or services or on both" which will be protected for a period of maximum one year despite the amendment of the Constitution. But the taxes sought to be covered is never "on goods" as such -- the taxes actually intended to be referred to are the taxes on sale or purchase of goods or on manufacture of goods or on entry of goods, etc. It can also be argued that Service Tax is also on not the ‘service’ per se -- it is on provision of such service.
So unless the relevant provision is suitably re-drafted --
the transitional provision becomes superfluous and a nullity as after amendment of the Constitution in the manner presently proposed in the GST Bill, the Sales Tax Acts and Entry Tax/ Octroi Acts of the States and the Central Excise Act as applicable to the goods sought to be covered under GST or even the provisions of Service Tax shall be inoperative from the very date of effect of such amendment of the Constitution, since the existing taxation entries of the Constitution have been sought to be replaced or even omitted.
So unless the relevant provision is suitably re-drafted --
the transitional provision becomes superfluous and a nullity as after amendment of the Constitution in the manner presently proposed in the GST Bill, the Sales Tax Acts and Entry Tax/ Octroi Acts of the States and the Central Excise Act as applicable to the goods sought to be covered under GST or even the provisions of Service Tax shall be inoperative from the very date of effect of such amendment of the Constitution, since the existing taxation entries of the Constitution have been sought to be replaced or even omitted.
(b) The existing entries in the Constitution relating to tax on items as goods as such, and not on events or transactions like manufacture, sale or purchase or entry etc involving goods, are the following:
Union List :
89. Terminal taxes on goods or passengers, carried by railway, sea or air; taxes on railway fares and freights."
State List :
56. Taxes on goods and passengers carried by road or on inland waterways.
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.
58. Taxes on animals and boats.
62. Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling.
So it may be argued that after one year from the proposed Constitutional amendment
all the above-mentioned entries in the Union and the State Lists shall cease to be in force, since they are taxes on goods or services as such, though all such taxes may not be subsumed in GST.
