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Taxation Law Internal Assignment - 1

SUBJECT: - TAXATION LAW

INTERNAL ASSIGNMENT – 1

PRESENTED TO: - PROF. APARAJITA KUMAR


PRESENTED BY: - RESHMA A. NAIR

2ND YEAR LL.B

PRN NO: 17010122049

TOPIC: - THE IMPACT OF 101ST AMENDMENT ON THE CONSTITUTIONAL


SCHEME OF TAXING POWERS.
Taxation Law Internal Assignment - 1

1. INTRODUCTION:-

Tax in any country plays a very important role in the growth of its economy. It is necessary for
good tax system to both keep a check on the income distribution as well as keep a check on the
ways to generate tax revenues to help the government. Let us go back to the history of taxation of
India to understand how it evolved over time. Tax was first time introduced in India in the year
1860 by Sir James Wilson. The motive behind this introduction was to combat the losses incurred
by the government during that period because of Military Mutiny. The tax system was amended
in few years and a new system was set in the following years of 1918, 1922 and finally in the year
1961 the Income Tax act was passed with a lot of amendments by the ministry. It was applicable
to the whole of India including Sikkim and J&K.

The constitution of India as important as it sounds is what that gives power to these tax system.
Our constitution is the seed for the growth of various schemes and facilities in the country.
Taxation in India is mainly under two bracket that is direct tax and indirect tax. If we go back in
time it is evident that India levied and earned mainly through indirect taxes since the majority of
population in our country was poor, the base of earning from direct tax was innately limited. It
was sensed that there was lot of misbalance and therefore the government constituted an enquiry
committee headed by Shri L.K Jha to study the structure. The committee found out that the indirect
tax had a cascading effect and the allocation of the resources was being distorted. After this the
government came up with a lot of new policies and one such was MODVAT in the year 1985.
Later with the introduction of economic reforms, in the year 1990 MODVAT was converted in
VAT and CENVAT. However it was observed that there were plenty of shortfall in the entire tax
system. And that was the advent of the GST in 2010 which was proposed by the Joint Working
Group of the Empowered Committee. The proposal at that time was that of a dual GST, one for
the centre and the state.1

1
https://www.jagranjosh.com/general-knowledge/history-of-taxation-in-india-1481028305-1
Taxation Law Internal Assignment - 1

2. PRE- GST ERA:-


 Taxes in India were broadly divided into direct tax and indirect tax. Direct tax are those
which are directly imposed upon individuals living in the country. Here the incidence
and impact of taxation falls on the tax payer and the burden of payment cannot be
shifted. The major source of direct tax in India is Income Tax. The next kind of tax that
we come on to is the indirect tax. Here the liability to pay taxes are mainly on the
manufacturers, producers and seller but however the burden of paying the taxes
ultimately fall on the consumers. Therefore due to this change of liability, it is known
as Indirect tax.
In India there is a clear bifurcation of power between the union and the state. The
government is divided in three main structure.
i. The union government
ii. The state government
iii. The local government
Provisions of the constitution regarding taxation are as follows:
a) Article 265: it says that only the authority of law has the right to levy
taxes. There is a strict ban in collection of arbitrary taxes.
b) Article 246: The authority to levy taxes is given under the article 246.
The parliament levy’s taxes on the whole of India whereas the state
legislature levy’s taxes for its own state.
c) Schedule 7: It is the seventh schedule which has three lists which
governs and gives powers to the union, centre and state. 2
 Concept Of VAT:
Value added tax is a concept which was introduced in the year 2005. VAT is a multi-
point system of taxation .

https://www.taxmann.com/bookstore/bookshop/bookfiles/Fundamentals%20of%20GST%20and%20Customs%20L
aw_samplechapter.pdf
Taxation Law Internal Assignment - 1

3. CONSTITUTIONAL AMENDMENT:-
After the proposal of GST it became essential to bring a lot of amendments in the constitution and
various constitutional entries relating to taxation. The 368th article of the Indian Constitution,
allows the parliament to amend the constitution by passing bill in both the houses by majority of
members and 2/3rd of the members present and voting. And also that the amendment has to be
approved by 50% of the state legislative. After a lot of debate and deliberations, the 101st
constitutional amendment gave birth to GST in India.3

4. CHANGES IN THE CONSTITUTINAL SCHEME OF TAXING


POWERS:-
The implementation of GST in India through the 101st constitutional amendment has bought
some alterations in the Constitution of India. The alterations are such that some of the articles
are amended or some of them are repelled. Further we will see how the new provisions along
with their effects post GST.
i. Article 246A- New Article- Special Provision with respect to GST:
After the enactment of GST, the state now has the power to make laws with respect to
the goods and service tax levied by the union as well as the state. Only in the case of
inter-state supply, the power to imply tax will be with the Parliament. Tax entries that
fall under list I and list II will continue to be with the union and state government
respectively. This article and the 7th schedule now has the power to impose tax in India
and all other conflicting entries have been removed or adjusted under the clause 17 of
the 101st amendment.

ii. Article 248 – Old Article Amended- Residuary Power Of legislation:

3
https://www.scribd.com/document/368083738/A-Revolutionary-Reform-for-Indirect-Tax-with-an-Analysis-of-
The-GST-Constitutional-One-hundred-and-first-Amendment-Act-2016
Taxation Law Internal Assignment - 1

Usually for the entries which are not a part of the concurrent or the state list, the
parliament has the right to make laws for them however in case of GST under article
246A the parliament cannot make any law without the consensus of the State.

iii. Article 249 – Old Article Amended - Power of Parliament to legislate with respect to
a matter in the State List in the national interest:
This Article gives the power to the parliament to make decisions and sanction any law
for the state mentioned on the state list. In order to do this, the parliament needs to
have the support of 2/3rd of members of council of the state. 2/3rd of votes is necessary
to enact any law relating to GST too.

iv. Article 250 – Old Article Amended- Power of Parliament to legislate with respect to
any matter in the State List if a Proclamation of Emergency is in operation:
GST is not any entry under the state list therefore in the case of any proclamation of
emergency the Parliament has all the right and power to enact laws related to it.

v. Article 268 – Old Article Amended - Duties levied by the Union but collected and
appropriated by the States :
It is interpreted that the additional duties of excise for medicinal and toilet preparation
is going to be considered into GST.

vi. Article 268A – Old Article Repelled -


vii. Article 269- Old Article Amended- Taxes levied and collected by the Union but
assigned to the States:
It is the seventh schedule that gives power to the centre to levy taxes on the sale or
purchase of goods and other consignment of goods. At present the collected tax is
automatically allocated to the respective state. Under the proposed GST regime, tax
on such inter-state transactions will be apportioned between the Union Govt. & the
State Govt. so deemed assignment of GST to the State government of in case of inter-
Taxation Law Internal Assignment - 1

state transactions has been made subject to Article 269A which provides that such tax
once collected shall be apportioned between the Centre & the State.4

viii. Article 269A – New Article- Levy and collection of goods and services tax in course
of inter-State trade or commerce:
The government has the authority to collect the GST and then appropriate the funds
between the centre and state as approved.

ix. Article 271 – Old Article Amended- Surcharge on certain duties and taxes for purposes
of the Union :
The Parliament has no power to charge extra surcharge over GST.

x. Article 366 – Old Article Amended, (12A) (26A) (26B) – Newly Added- Definition:
With the enactment of GST, three new definition has been added in the constitution.
One is definition of GST, the term service is now considered as everything which are
not goods. Exception being alcohol.

xi. Changes in the seventh schedule:


i. Union List: The entry list 84 first consisted the duties tobacco, alcoholic
liquors, opium, Indian hemp, narcotic drugs and narcotics, medical and toilet
preparations. However now it’s been replaced by petroleum crude, high speed
diesel, motor spirit , natural gas, and aviation turbine fuel, tobacco and tobacco
products.
ii. State list: A lot of other changes have been bought under the state list since
GST. In Entry 54, Taxes on the sale or purchase of goods other than newspapers,
subject to the provisions of Entry 92-A of List I.; has been now replaced.
5

4
https://taxguru.in/goods-and-service-tax/gst-how-constitution-of-india-drives-tax-mechanism-india.html
5
https://www.gktoday.in/gk/constitution-101st-amendment-act-2016/#Changes_in_the_7th_Schedule
Taxation Law Internal Assignment - 1

5. BENEFITS OF GST:
a) Benefits for Union:
Earlier, the union did not have the power to levy tax on production of goods and the
power to levy tax on sale was with the state except in the case of interstate sale. After
GST the expected benefits are
i. Increase in GDP
ii. Increase in exports
iii. Prevents tax evasion
iv. Taxable from the production to distribution point
b) Benefit for State:
GST will bring uniformity in taxes between all the states. Other benefits are
i. The state will have power to tax
ii. Increase in revenue due to broadening of tax bases.
iii. Removal of burden of CST
c) Benefit To Industry:
i. A single tax has to be paid, since the rest are subsumed under GST
ii. Uniformity in tax procedure throughout the country
iii. Increase in competition in foreign markets, due to reduction of tax.
d) Benefit to Consumer
i. Less of tax burden on the consumer
ii. The government can use the funds for the welfare of state.6

6. DEMERITS:
All though the GST has a lot of benefits to the tax regime of the country, the greatest
disadvantage is that earlier service tax was that of 15% but now the decided GST is 18-20%.
All the services have now tend to become more costly than earlier. Some of the economist also
believe that implementation of GST though a boon for many industry, but it is a bane to the

6
https://www.scribd.com/document/338375216/GST-in-INDIA-Project-Report-Gst
Taxation Law Internal Assignment - 1

real estate industry. It is also believed that GST as is not applicable on certain goods, the state
can recover the shortfall of the revenue by charging more tax on such goods.

7. CONCLUSION:-
The enactment of GST in India has been one of the best decision taken by the government, to
stabilize the tax regime of the country. With the enactment of GST it is clear that the entire tax
system has been made more transparent making it a little corruption free. Even though the
current structure of GST is not flawless but the term of ONE NATION, ONE TAX is a game-
changer on its own. It is certain that the implementation of GST will not be a failure as it is
almost a success in 150 countries. According to me GST will be a boost to the economy as it
will reduce the cascading effect and also promote the make in India project as it is cutting down
on VAT, service tax etc. it is also to be taken in consideration that to make GST a success, a
lot of roadblocks have to be tackled. Bringing about an integration in the tax regime is going
to be a herculean task however it can be combated if the amendments bought in the constitution
are well made, services have been properly implemented, and apart from that there should be
system that controls the flow of the goods and services. Therefore according to me the
introduction of GST has helped in making the tax process efficient and has been a resourceful
for both government and business.

7
INDIA, L.GST: New Dimensions in Indian Tax System
http://www.legalservicesindia.com/article/2240/GST:-New-Dimensions-in-Indian-Tax-System.html
Taxation Law Internal Assignment - 1