Before going into the depth of Constitution of India and its amendments we have to first understand why it needs to be amended to bring the GST Law. The GST Law is seen as one of the biggest tax reform in our country since Independence. The man who is behind this concept of GST in India is Mr. Atal Bihari Vajpayee who was the prime minister of India from 1998-2004. The Domestic and Foreign Industry Players are always having concerns with our present Indirect Tax System and its administration. India is Federal Country where Centre and State has its own taxation powers inbuilt in our constitution. The Union is levying Excise duty, Service Tax, Custom duty and States are levying and collecting VAT, CST, entry Tax, entertainment Tax. The Constitution is required to be amended because the Power of State and Centre shall be restructured in the Constitution itself and the Seventh Schedule which contains Union and State List shall be amended.
In this phase of my write up I am trying to explain the step by step events from the date when the concept of GST was first introduced by Union Finance Minister in his Budget Speech of 2006-2007. In his Budget Speech of 2007-2008 Mr. P. Chidambaram requested the Empowered Committee of State Finance Ministers (EC) headed by Dr. Asim Dasgupta to work with central Government to prepare the road map for introduction of GST from 01-04-2010. After this delegation by Union FM to EC the EC then formed a Joint working Group to study the International Models of GST across the world. In November 2007 the Joint Working Group submitted its report to EC which contains the Dual GST structure for Indian Economy.
After due discussion between Central Government and Empowered Committee of State Finance Ministers the First Discussion Paper was prepared to make the GST Law a reality in India. The First attempt to introduce GST was made by then Finance Minister Shri Pranab Mukherjee on 16-03-2011 by introducing the Constitutional 115th Amendment Bill 2011 and the bill contains the amendments which were necessary to make the GST Law. The Bill was then sent to Parliamentary Standing Committee on Finance headed by Yashwant Sinha former Union Finance Minister and after due discussion with stakeholders and States the Committee submitted its Report with recommendation in August 2013 to both the Houses of Parliament. As usual the Centre Revised the Draft Constitutional Amendment Bill by accepting most of the recommendations made by Standing Committee and after this the Centre discussed the revised bill with States to reach on some conclusions. Unfortunately the helpless, unwilling and scam driven UPA Government could not convince the States on revised bill soon after the election were declared and the regime of UPA was demolished by Modi wave.
Now the BJP led NDA Government which people voted for development, growth and employment again started discussion with the states under leadership of Shri Arun Jaitley (Union Finance Minister) and finally reached on conclusion by drafting a fresh bill on Constitutional Amendment. The above said bill was drafted by keeping in mind the earlier developments and suggestion made by Standing Committee on Finance and pending demands of State Finance Ministers. The Constitutional (122nd) Amendment Bill, 2014 was introduced in Loksabha on 19-12-2014.
Now I have made a small attempt to decode this Amendment Bill and give you clarity on each and every aspect of the Bill. Before that it’s worthwhile to understand the process of amendment of Constitution.
Article 368: Power of Parliament to amend the Constitution and procedure thereof : Amendment in Constitution can be made by introducing a bill in either house of the Parliament and Bill has to be passed by 2/3 members of each house Present and voting, After this bill shall be sent to the president for its assent But if the bill need amendment in any of the list in 7th schedule ( Other articles also given) then it has to be ratified by at least half of the state assemblies After ratification by half of the state assembly it shall be sent to President of India for its assent. From above discussion you can understand that it is impossible for the Union Government to Introduce GST without support of States Assemblies and opposition in both the Houses of Parliament.
Now the provisions of this Bill have been analyzed one by one, and wherever possible comparison has been made with the Bill drafted by the UPA Government.
A. The GST Council shall consist Union Finance Minister as a Chairperson, Union Minister of State in charge of Finance as a member, the State Finance Minister or State Revenue Minister as a member of the Council and the State FM shall select one of them as Vice Chairperson of Council.
B. The quorum of GST Council shall be ½ of its members.
C. Every Decision of the Council shall be taken at a meeting by a majority of at least ¾ of the weighted votes of the members present and voting. The vote of Centre shall have a weightage of 1/3 of total vote cast and vote of States taken together shall have weightage of 2/3 of total vote cast. From this mathematics we can conclude that Centre has VETO Power in the GST Council for decision making.
D. One of the contentious Clause of Article 279A is recommendation made by GST Council to the Union and the States on various critical matters. After so many meeting and deliberations this clause has been finalized and produced as under:
The Council shall make recommendation to the Union and States on following matters:
Which taxes, surcharge, Cesses levied by Union, States and Local bodies shall be subsumed in GST. The taxes levied at present by Centre i.e. Excise Duty, Additional Excise duty, Service Tax, Additional Custom Duty, Special additional duty, Excise on Medicinal Toilet Preparations and Central Cesses and surcharge shall be subsumed in GST and taxes levied by States i.e. VAT, Entertainment Taxes, Luxury tax, lottery tax, CST and Entry taxes or Octrio shall be subsumed in GST. Basic Custom duty will remain alive and shall be collected by Custom Authorities as usual.
After taking several rounds of meeting by Union Finance Minister with State FM the above issue of items to be subsumed into GST has been resolved and still the alcohol is outside the ambit of GST and Petrol products has been included in the GST but they shall enjoy their present status unless recommended by GST Council as taxable under GST.
Second recommendation by GST Council shall be with regard to Goods and Services which shall be exempt under GST regime, threshold under GST Law, Model GST Law i.e. GST Act GST Rules, Principal which shall govern place of supply rules etc.
3. Third recommendation by GST Council shall be with regard to floor rate with band of goods and services; this recommendation was not included in 115th constitutional amendment bill drafted by UPA Government in 2011. Though states were adamant on this issue but in my personal opinion the power to change the rate of GST shall bring down the harmonization of GST Law. But any how the Union Finance Minister has VETO in the GST Council and we assume he shall not allow any such adverse decisions except under special circumstances.
In this part I am merging rest of the recommendations and they are special provisions to some states including Jammu and Kashmir, special rates for specified period to meet natural calamity and disaster and last are the residuary power i.e. any other matter relating to GST as the Council may decide.
We have not discussed one question which is coming into my mind about the disputes among various states or states with Centre; The earlier bill of UPA regime had provision of Dispute settlement Authority which was opposed by almost all of the states and also by Standing Committee on Finance and therefore this bill contains one provision that Council shall decide about the modalities to resolve the disputes arising out of its recommendations.
Amendment of Article 286: This article imposed restriction on States to make law on Interstate transactions and also the Import into Indian Territory. The amendment has just replaced the word sale or purchase of goods with supply of goods or Services or both. This amendment has deleted the concept of declared goods from Constitution itself. In the GST regime there is no concept of declared goods or goods of special importance.
Amendment of Article 366 : In this Article law makers has inserted clause 12A, Clause 26A and Clause 26B, Now Clause 12A has defined word “goods and service tax” , Clause 26A has defined word “service” and Clause 26B has defined meaning of “State”. “Goods and service tax” means any tax on supply of goods or services or both except taxes on supply of alcoholic liquor for human consumption. Definition is very simple and technically barred the alcoholic liquor for human consumption from GST through constitution, Earlier the states were demanding petrol products in the same category as alcoholic liquor for human consumption.
“Service has been defined as anything other than goods” and States has been defined as “States includes Union Territory with legislature”.
Amendment of Article 368: The procedure of amendment has been discussed earlier in this write up and there are certain matters where the amendment of Constitution is to be ratified by half of state assemblies and therefore by this amendment article 279A (GST Council) has been kept into that category also.
Amendment of Sixth Schedule: The sixth schedule contains the provisions as to administration of tribal areas of Assam, Meghalaya, Tripura and Mizoram, by amending this schedule law maker has empowered district council of these states to levy and collect taxes on entertainment and amusements.
AMENDMENT OF SEVENTH SCHEDULE: This schedule contains the union list, state list and concurrent list and the amendment of this list before introducing GST was very crucial for law makers. The major amendments have been proposed in both union list and state list which are discussed hereunder.
Changes proposed in union list: Earlier entry 84 has empowered centre to levy excise on all products including tobacco products but excluding alcoholic liquor or human consumption, now the amendment will take away the power of centre to levy excise on manufacturing except tobacco and petrol products. In nutshell in place of excise centre shall levy CSGT and IGST. Entry 92 and 92C has been proposed to delete the concept of taxes on sale or purchase of newspaper and advertisement thereon and service tax as levied by centre at present on provision of service.
Changes proposed in state list: Entry tax has been subsumed in GST therefore entry 52 has been deleted from state list and entry 55 empowering states to levy the tax on advertisement has been deleted from constitution itself. By amending entry 54 states has been empowered to levy tax on petrol and its related products except the sale of these items in interstate business. Entry 62 has been proposed to subsume luxury tax in the GST and taxes on entertainment and amusement shall only be levied and collected by local bodies only.
GST is destination based consumption tax : GST is a destination based consumption tax hence revenue shall accrue to those states where goods or services are finally consumed, now the producer states shall be discouraged for such huge production and to compensate them an extra 1% tax on supply of goods shall be levied for 2 years.
Compensation for States for loss on account of GST implementation shall be adequately placed in constitution and the period of compensation may not go beyond 5 years.
The Indian Industry is waiting very desperately for GST because it will subsume major indirect taxes levied by Central Government and State Government which will remove the cascading effect of taxes on costing of the Industry. The GST if implemented shall make the tax structure simple and hassle free for trade and Industry.
Now as on date everyone including me is hopeful that this amendment bill get passed in budget session of the parliament and also ratified by the states concerned. If all goes well in next session specially Rajyasabha the GST become reality from 01-04-2016.
This article is written by
+CA Vinod Kaushik 
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