By its union list and state list, India’s constitution grants the ability to tax both the union and state governments. The 101st constitution amendment act established the “one nation, one tax” system.
The hurdles proposed by both the federal and state governments’ taxation systems are removed by a single indirect taxes system that applies across the country. The central goods and services tax (Extension to Jammu and Kashmir) Act, 2017, governs its application to the union territory of Jammu and Kashmir. The smooth movement of commodities across the country was ensured by this pan India uniform indirect tax structure.
- The GST is a value-added tax applied on most products and services sold for domestic consumption. Consumers pay the GST, but businesses selling the products and services must remit it to the government.
- GST was initially established in India as The Constitution (122nd Amendment) Bill in 2014.
- This was approved in 2016 and renumbered The Constitution (101st Amendment) Act, 2016 in the legislation by Rajya Sabha.
- SALIENT FEATURES OF THE 101st CONSTITUTION AMENDMENT ACT
The 101st constitution amendment act, 2016 has some salient features. These are as follows:
- The one hundred and first constitution amendment act created Article 246A, which gave the parliament and state legislatures the right to enact goods and services tax legislation. The parliament has the authority to pass legislation governing inter-state supplies.
- Article 269A of the constitution was also enacted as a result of the act, which mandates income from the Integrated Goods and Services Tax (IGST). IGST is in charge of interstate supplies. The IGST Act of 2017 governs IGST.
- The 101st constitution amendment legislation also included Article 279A, which gave the president the authority to form a GST council. Ministers from both the federal and state governments will serve on the GST council. This council has the authority to make suggestions, obtain, or change any goods and services tax rule or regulation.
- The constitution was revised to limit the imposition of tax by the state on the provision of products or services, or both, when the collection occurs outside the respective state’s territory, as well as on the export and import of goods in India. Previously, this restriction applied only to the sale or purchase of commodities, but it has now been superseded by the provision of goods or services, or both.
- The Union list, State list, and concurrent list are all found in the seventh schedule. The aspects on which the union government can create laws are included in the union list. The state government, on the other hand, has the authority to pass laws in the areas listed in the state list, and both the federal and state governments have the authority to pass laws in the areas listed in the concurrent list.
- The union list gives the union government the authority to collect excise duties on the manufacture/production of petroleum crude, high-speed diesel, motor spirit, natural gas, and aviation turbine fuel. The state government also acquires the ability to charge taxes on the five petroleum products, but only if they are sold in interstate trade or commerce or in the course of international trade or commerce, according to the state list.
- If the state suffers a revenue loss as a result of the GST, it can seek compensation from the federal government. The Goods and Services (Compensation to States) Act, 2017, governs it for up to five years.
- There is no distinction between the goods and services tax. Both commodities and services have the same price.
- The ability for Parliament and state legislatures to pass laws governing the goods and services tax at the same time.
- A tax will be imposed on all goods and services supplied.
- Includes the majority of state and federal indirect taxes (barring few exceptions)
- On all transactions within a State, the Centre would impose and collect Central Goods and Services Tax (CGST), while the States would tax and collect State Goods and Services Tax (SGST).
- Except for exempted goods and services, commodities that are outside the scope of GST, and transactions that are below statutory threshold limits, the Central GST and State GST would be levied simultaneously on every transaction of supply of goods and services. Furthermore, unlike State VAT, which is paid on the value of the items plus Central Excise, both would be levied on the same price or value.
- The use of CGST credit for both products and services would be permitted. In the event of SGST, a similar provision of credit cross-utilization will be offered.
- However, under the IGST model, cross-utilization of CGST and SGST will be prohibited except in the event of inter-State supply of goods and services, as stated below.
- Under Article 269A (1) of the Constitution, the Centre would impose and collect the Integrated Goods and Services Tax (IGST) on all inter-State deliveries of goods and services in the case of inter-State transactions.
- The IGST would be the sum of the CGST and the SGST. The IGST method is created to ensure that input tax credits move smoothly from one state to the next.
- After correcting credit of IGST, CGST, and SGST on his purchases, the inter-State seller would pay IGST on the sale of his goods to the Central Government (in that order).
- The exporting state will pass the SGST credit utilised in IGST payment to the Centre.
- The importer would claim IGST credit while paying his production tax bill (both CGST and SGST) in his home state.
- The IGST credit used in SGST payment would be transferred to the importing State by the Centre. Because GST is a destination-based tax, all SGST on the end product usually goes to the consuming state.
- PRODUCING VERSUS CONSUMING STATES
- The implementation of a destination-based GST will cost major manufacturing states like Gujarat and Maharashtra a significant amount of tax revenue that was previously generated by interstate taxes (such as the Central sales tax).
- For the first five years, such states will be fully paid (100 percent of their losses).
- A one-percentage-point increase in the Integrated Goods and Services Tax (IGST) for two years was recommended. However, in the modified bill enacted by the Rajya Sabha, this provision was removed.
- Similarly, the demand for a constitutional cap on the GST rate has been dropped.
- At each stage, the CGST input tax credit would be available for discharging the CGST due on the output, and the SGST paid on inputs credit would be available for paying the SGST on output.
- Credit cross-utilization would be prohibited.
- The Centre and the States will have concurrent legislative powers over commodities and services.
- The IGST (Intersect Supply of Goods and Services) and import taxes can only be levied by the central government; state rules on GST will not be overridden.
- Because GST would be a single tax at the federal and state levels, input tax credit set off will be available for intra-state and inter-state transactions.
- Except for exempted goods and services, commodities that are outside the scope of GST, and transactions that are below the stipulated threshold limitations, the Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services.
- Furthermore, unlike State VAT, which is paid on the value of the items plus Central Excise, both would be levied on the same price or value.
- Alcohol intended for human use is exempted from GST.
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