Test: Evolution and Constitutional Background of GST in India - CLAT PG MCQ

The Constitution (101st Amendment) Act, 2016 was pivotal in integrating various indirect taxes into a single Goods and Services Tax (GST) system. This amendment aimed to simplify the tax structure in India, facilitating easier compliance for businesses and enhancing the overall efficiency of tax collection. An important outcome of this integration is the reduction of cascading taxes, which has benefitted consumers.

Article 366 provides the definitions related to 'Goods and Services Tax,' 'Services,' and 'State.' It clarifies what constitutes GST, encompassing taxes on the supply of goods and services, and explicitly excludes alcoholic liquor for human consumption. This article is crucial for understanding the scope and application of GST in India.

The State Goods and Service Tax (SGST) replaces various state-level taxes, including the Entertainment Tax, which was previously levied by state governments. By subsuming such taxes into SGST, the GST regime aims to create a more uniform taxation structure across states, enhancing ease of doing business and reducing compliance burdens for taxpayers.

The GST structure is implemented on a concurrent dual basis, allowing both the Centre and State governments to levy and collect GST. This dual structure helps in managing the complexities of taxation in a federal system and ensures that both levels of government can generate revenue from goods and services. The concurrent approach also facilitates better coordination between different tax authorities.

Article 269A specifically mandates that GST on inter-State supplies shall be levied and collected by the Government of India, with the proceeds shared between the Centre and States as per laws made by Parliament. This arrangement is crucial for managing the complexities of tax collection in a federal structure, especially given the challenges of inter-State commerce.

Article 265 explicitly prohibits arbitrary tax collection, stating that taxes can only be levied or collected if there is a legal authority backing it. This ensures that all tax collections are grounded in law, preventing any misuse of power by governmental bodies. An interesting fact about this article is that it serves as a fundamental principle of taxation in India, aiming to protect taxpayers' rights.

The State Goods and Service Tax (SGST) is a key component of the dual GST structure, which also includes Central Goods and Service Tax (CGST). This dual system allows both the Centre and State governments to levy taxes on the same supply of goods and services, promoting a more integrated economic environment. The implementation of SGST enables states to collect revenue while still adhering to a unified tax regime.

Petroleum products are excluded from GST. While the Central Excise Duty, VAT, and Service Tax have been subsumed under GST, certain products like alcohol and petroleum continue to be taxed outside the GST framework. This exclusion is significant as it allows states to retain control over revenue from these essential goods, which can be politically sensitive.

The term 'ultra vires' refers to actions taken beyond the legal authority granted. In the context of tax laws, if any tax law is not aligned with the Constitution, it is considered ultra vires and is thus deemed illegal and void. This principle is crucial in maintaining the rule of law in taxation, ensuring that all taxes must be levied under clear legal provisions. An important aspect of this is that it protects citizens from arbitrary tax imposition by authorities.

The Goods and Services Tax Council, established under Article 279A, is primarily responsible for making recommendations on various aspects of GST, including tax rates, exemptions, and dispute resolutions. This council plays a vital role in ensuring a coherent approach to GST implementation across different states. An interesting aspect is that decisions in the council require a majority of not less than three-fourths of the weighted votes, reflecting the collaborative nature of tax governance.

Article 279A empowers the President to constitute the Goods and Services Tax Council. This council serves as a cooperative federal body, representing both the Centre and State governments in matters related to GST. The establishment of the GST Council is a significant step towards collaborative governance in tax matters, enabling states to have a say in tax policy-making.

The primary objective of implementing GST in India is to simplify the taxation process and eliminate the cascading effect of taxes, where a tax is levied on another tax. By integrating various indirect taxes into a single tax system, GST aims to enhance compliance, promote ease of business, and ultimately lower the tax burden on consumers. This simplification is crucial for stimulating economic growth.

Article 246A, introduced by the Constitution (101st Amendment) Act, 2016, grants both the Centre and States the authority to levy GST. This amendment was crucial for the implementation of GST as a unified tax system in India. It allowed for a collaborative fiscal structure, which is significant in managing inter-State trade and commerce.

The Integrated Goods and Service Tax (IGST) is specifically levied on inter-State supplies of goods and services. It allows for seamless movement of goods across state borders and helps in the apportionment of revenue between the Centre and the States. IGST is calculated as the sum of CGST and SGST, making it an essential feature of the GST regime designed to streamline inter-State transactions.

In the GST Council's decision-making process, the Centre's vote carries a weightage of one-third. This weighted voting system is designed to ensure that both the Centre and the States have a significant say in the decision-making process, reflecting the federal structure of governance in India. This approach encourages cooperation and consensus-building among different levels of government.