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Goods and Services Tax

Context:

The Supreme Court, in a judgment championing the importance of “cooperative federalism” for the well-being of democracy, held that Union and State legislatures have “equal, simultaneous and unique powers” to make laws on Goods and Services Tax (GST) and the recommendations of the GST Council are not binding on them.

  • The apex court’s decision came while confirming a Gujarat High Court ruling that the Centre cannot levy Integrated Goods and Services Tax (IGST) on ocean freight from Indian importers.

Relevance:

GS III- Indian Economy

Dimensions of the Article:

  1. Key takeaways of the Judgement
  2. What is GST?
  3. GST Council

Key takeaways of the Judgement:

  • The recommendations of the GST Council are the product of a collaborative dialogue involving the Union and the States. They are recommendatory in nature.
  • The recommendations only have a persuasive value.
  • To regard them as binding would disrupt fiscal federalism when both the Union and the States are conferred equal power to legislate on GST
  • The court emphasised that Article 246A (which gives the States power to make laws with respect to GST) of the Constitution treat the Union and the States as “equal units”.
  • It confers a simultaneous power (on Union and States) for enacting laws on GST.
  • Article 279A, in constituting the GST Council, envisions that neither the Centre nor the States are actually dependent on the other.

What is GST?

GST is a destination-based indirect tax and is levied at the final consumption point. Under it, the final consumer of the goods and services bear the tax charged in the supply chain. GST is a transparent and fair system that prevents black money and corruption and promotes new governance culture.

GST Act

  • Goods and Services Tax (GST) Act came into effect in 2017.
  • Goods and Services Tax (GST) was introduced by the Government of India to boost the economic growth of India. GST is considered to be the biggest taxation reform in the history of the Indian economy.
  • The power to make any changes in the GST law is in the hands of the GST Council. GST Council is headed by the Finance Minister. One hundred and first amendment act, 2016 introduced the GST in India in July 2017.

GST Council

  • Goods & Services Tax Council is a constitutional body for making recommendations to the Union and State Government on issues related to Goods and Service Tax.
  • As per Article 279A (1) of the amended Constitution, the GST Council has to be constituted by the President within 60 days of the commencement of Article 279A.
  • The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2016, for the introduction of Goods and Services Tax in the country was introduced in the Parliament and passed by Rajya Sabha on 3rd August 2016 and by Lok Sabha on 8th August 2016.
  • GST Council is an apex member committee to modify, reconcile or procure any law or regulation based on the context of goods and services tax in India.
  • The GST council is responsible for any revision or enactment of rule or any rate changes of the goods and services in India.
  • The council contains the following members:
    • Union Finance Minister (as chairperson)
    • Union Minister of States in charge of revenue or finance (as members)
    • The ministers of states in charge of finance or taxation or other ministers as nominated by each state’s government (as members).

Matters on which GST Council makes recommendations

  • Taxes, cesses, and surcharges levied by the Centre, States and local bodies which may be subsumed in the GST;
  • Goods and services which may be subjected to or exempted from GST;
  • Model GST laws, principles of levy, apportionment of IGST and principles that govern the place of supply;
  • Threshold limit of turnover below which goods and services may be exempted from GST;
  • Rates including floor rates with bands of GST;
  • Special rates to raise additional resources during any natural calamity;
  • Special provision with respect to Arunachal Pradesh, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand;
  • Any other matter relating to the goods and services tax, as the Council may decide.

-Source: The Hindu

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November 2022
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