Skip to main content

The Curious case of GST Council and the Indian Federalism

GST Counsil and Indian Federalism

A federal State derives its existence from the Constitution, just as a corporation derives its existence from the grant by which it is created. Hence every power, executive, legislative or judicial, whether it belong to the nation or to the individual States, is subordinate to and controlled by the Constitution.[1]

In my previous article on GST [2], I have given an overview of what GST actually is and what are its probable effects on Indian tax regime. In this article I am going to concentrate on how GST will affect the very foundation of Indian Constitution, the federal tax structure. Federal structure in taxation means both the States and the Centre have the power to tax the goods & services that are in their jurisdiction. The GST as will be explained further is enshrined with some provisions that will affect the fiscal autonomy of the States. For understanding the GST effect on federal structure, we have to first understand the GST Council.

GST Council

With One Hundred and First Constitutional Amendment Act, 2016, Article 279(A) was inserted which talks about the GST Council. This council has to be instituted with 60 days after the amendment with the recommendation of the President.[3] The GST Council shall consist of the Union Finance Minister, who will be the Chairperson, and the Union Minister of State in charge of Revenue and Minister in charge of Finance or Taxation or any minister nominated by the State government would constitute the members and the States will choose among themselves one minister who would be the Vice-Chairperson.

Now the problem with GST council is that it is the ultimate authority that will recommend to the States and the Union of the tax to be imposed on the goods & services. It will recommend that States, Centre and even the local bodies about how much taxes, cesses and surcharges would be levied by them. And also it reserve the right to decide the date on which GST be levied on petroleum crude, high speed diesel, motor spirit, natural gas and aviation turbine fuel. While previously up to some extent the States reserved the right to levy surcharges and taxes on petroleum and petroleum related products, but after this measure the States revenue from this sector would be completely wiped out. Also many States used to impose higher taxes on tobacco and tobacco related products, and that constitute a prominent part of their State revenue, but under GST act this subject has been kept under consideration and GST Council will decide later how much tax should be imposed.
As we already know GST is a destination based tax, so the manufacturing States will be allowed to charge additional levy in case of inter-state trade, which have been kept very limited in the present case. Also whatever taxes that are levied in case of inter-state trade will go directly in consolidating fund, no distribution of taxes will be there between the Centre and the States.

Every Decision made during the meeting should be supported by at least 75 percent majority of the weighted votes of the members who are present and voting at the meeting. In “Article 279A” a principle is there which divides the total weighted vote cast between Central Government and State Government :-

(i) The vote of Central Government shall have the weighted of one-third of the total votes

(ii) The votes of State Government shall have the weighted of two third of the total votes, cast in the meeting.

So, if the Centre anyhow manages to get the votes of 6-7 States it can change or introduce a new tax on whatever goods & services it wants to. And also the GST Council will establish a mechanism to adjudicate any dispute between the Govt. Of India and one or more States or between the Govt of India and any States on one side and one or more others States on the other side; or between two or more States.

Now you can understand the relevance of the quotation up above by A.V.Dicey. The GST Council will somehow effect the financial federal structure of India.
[1] Law of the Constitution by A.V. Dicey p. 144.
[2]GST: India’s approach to One Nation, One Tax
[3] Art 279(A)(1), Indian Constitution.

Popular posts from this blog

Art of Cross Examination used by: Sr. Adv. Ram Jethmalani, Supreme court

“The issue of a cause rarely depends upon a speech and is but seldom even affected by it. But there is never a cause contested, the result of which is not mainly dependent upon the skill with which the advocate conducts his cross examination.”- Francis L. Wellman

When asked, the undisputed champion of cross-examination, Mr. Ram Jethmalanidescribed the art of cross-examination as the most effective weapon for the discovery of truth, provided the objective is not to confound a truthful witness but to extract truth from an unwilling witness.
The search for truth is the ultimate and idealistic end of all litigated matter in a court trial, and that truth is obtained due to the process of cross examination in the conduct of litigation.

Mr. Jethmalani understands that in India where large number of complaints and cases are filed in civil and criminal courts every day, delay in justice is common due to the rapidly growing pendency of cases in courts. Examination of witnesses plays an important …

Rights to Constitutional Remedies- Writs under Art. 32 and 226 of Indian Constitution

Under the common law system, a writ is meant to be a written order, informal in nature which is issued by either by an administrative or judicial body. The aim of this paper is to identify writs as a constitutional remedy. The paper is divided into four parts. The first part would deal with the origin, purpose of writs which would examine the historical developments that took place with respect to writs. The second part of the paper would be specific to the Indian Legal Systems. This part would closely examine the existence and use of writs as per the provisions of the Indian Constitution as a constitutional right to remedy. The third part of the paper would elaborate on all the types of writ remedies and its usage in the Indian Legal System. The last part of the paper would be the conclusion that would deal with appraisal and the critical analysis of writs. The purpose of this paper is to celebrate writs as a powerful constitution remedy and highlight the importance of the same in th…

Dishonour of Cheque: Punishment under NI Act

INTRODUCTION:Negotiable Instrument literally means any promissory note, bill of exchange or cheque, and in easier terms, it means a piece of paper which will hold the promisee to claim some amount of money out of the paper. Section 6 of the Negotiable Instruments Act defines the word cheque. It further is classified as Bearer Cheque, Crossed Cheque, Self Cheque, Post-dated cheque, Banker’s cheque and traveller’s cheque. In general sense, cheques are the easiest way to transact in the present times. One may easily transfer money through cheques over long distances on a daily basis. On one hand, wherein cheques are used to transact daily over the relationship of trust, it is always advisable on the face of it during transactions that the cheque be issued in the crossed account payee section to avoid its misuse. It is also stated that the transactions as these cheques are not negotiable to any other person than payee, it gives a prima facie advantage to both of them. In a layman’s langua…