Comparison of Goods and Services Tax Bill under UPA II and NDA

The Goods and Services Tax Bill was first introduced in the Lok Sabha, under the UPA II government, on 11 March, 2011, to amend the Constitution under the 115^th Amendment. It was subsequently referred to the Standing Committee on 29 March, 2011, which submitted its report in August 2013. The Bill remained pending and finally lapsed with the dissolution of the 15^th Lok Sabha. With the NDA government taking over in 2014, the Bill, with certain changes, was freshly introduced, under the 122^nd Amendment of the Constitution, in 16^th Lok Sabha on 19 December, 2014, which passed it on 6 May, 2015. The Bill was then sent to a Select Committee in Rajya Sabha that examined it and submitted its Report with three Notes of Dissent. So how was the GST Bill of 2011 different from the one introduced in 2014? Read : Impact of GST Bill on Various Sectors and Common Man

Introduction of GST

2011 Constitution Bill (115^th Amendment) The purpose of the Bill was to give the Central and state government concurrent power to introduce laws on taxation of goods and services. The Bill was defined as any tax on goods and services excluding liquor, crude petroleum, petrol, high speed diesel, natural gas, and aviation turbine fuel. The GST was to subsume CENVAT, CVD, SAD, VAT and various state taxes. Standing Committee Recommendations in 2013 stated that the imposition of GST ought to be made optional for states similar to the format followed for VAT. The Committee’s recommendations were not included.

2014 Constitutional Bill (122^nd Amendment)

The Bill was defined as any tax levied on goods or services, except taxes on the supply of liquor for human consumption. Levy and collection of Integrated GST (IGST) on account of interstate trade or commerce

2011 Constitution Bill (115^th Amendment)

A new article was inserted in the Constitution which stated that only the centre would have the right to levy and collect taxes on goods and services resulting from interstate trade or commerce, and the tax collected would be shared between centre and state as decided by law laid down by the Parliament. The law would also determine the ‘Principles’ on the basis of which transactions of good or services were to take place between states. Standing Committee Recommendations in 2013 Distribution of balance IGST amounts: The recommendation stated that at the end of each fiscal year there may be a positive balance in proceeds from IGST therefore, provision had to be made to distribute the same after the annual account for the fiscal year is settled. Alternative to IGST model suggested: It was recommended that the Modified Bank Model be considered as an alternate to the IGST to ensure better compliance and efficient clearing mechanisms between concerned states. The 13^th Finance Commission had set up a Task Force on GST that offered the Modified Bank Model as an alternate to IGST regime. Concerns of producer states: The IGST model was seen to favour destination states, to the disadvantage of producer states, therefore, this concern had to be addressed. The Standing Committee Recommendations were partially accepted. 2014 Constitutional Bill (122^nd Amendment) Apportionment of IGST: The Bill added a provision that entitles the GST Council to make recommendations regarding apportionment of IGST. Additional tax: The Bill stated that an additional tax, not exceeding 1%, may be levied and collected by the centre and directly assigned to the state from where the supply originated. The additional tax collected would not form part of the Consolidated Fund of India. The same was to be applicable for two years or as defined by the GST Council. The centre would retain the right to exclude certain goods and also define principles to determine the origin of the goods.

Goods and Services Tax Council

2011 Constitution Bill (115^th Amendment) The objective of the GST Council was to create a harmonized structure and market for goods and services in India. It was to have three members - a) Union Minister of Finance as the Chairman, b) Union Minister of State for Revenue, c) Minister of Finance or Taxation, or any other portfolio from each state. For Quorum, it was proposed that one third of the GST Council members would constitute Quorum. All decisions of the GST Council were to be taken through consensus of all members. Standing Committee Recommendations in 2013 The Committee recommended that the word ‘harmonized structure’ should not be left ambiguous and must be clearly defined. This provision was to be a guiding principle and not made mandatory. The recommendations were not incorporated. Regarding Quorum, the Committee recommended that the number be increased from one third to half. This recommendation was incorporated. The Committee recommended that the Bill must provide for voting in decision making rather than consensus between members. One third of the weightage was to stay with the centre while the states would have two third weightage. A decision could be passed with three-fourth votes. This recommendation was incorporated. The Committee recommended creation of a GST Monitoring/Evaluation Cell that would look into administrative problems, price paid by the end user, inflation, GDP growth trends, and compliance costs of the concerned taxpayers. This recommendation was not incorporated. 2014 Constitutional Bill (122^nd Amendment) The Bill retained the objective of GST Council as defined in the 2011 Bill. On members of the GST Council, the Bill proposed that one of the members could be a Union Minister of State in charge of Finance or Revenue. The Bill proposed that Quorum would comprise half the total members of the GST Council present. On decision making, voting was to be adopted with three-fourth majority required to pass decisions, with one-third weightage with the centre and two-third weightage with the states.

Functions of the GST Council

2011 Constitution Bill (115^th Amendment) The GST Council was to provide a framework for goods and services tax that was to include the following: Various taxes, surcharge and cesses that were being levied by the centre and respective states were to be included or subsumed into the GST. The rate of GST was to be fixed and threshold limit of turnover defined, below which, GST was to be exempted. An exemption list was to be prepared that would be excluded from the purview of GST. Standing Committee Recommendations in 2013 In order to provide the states some flexibility in calibrating taxes, it was recommended to set a band with a floor rate, with the option for states to levy a higher rate on demerit goods, if required. Under extra ordinary situations, it was recommended to allow the centre flexibility to levy special surcharge or cess. In case of natural calamities, both the centre and state must be allowed to raise additional resources. It suggested that the Bill must provide for special schemes for states like J&K, and those in Northeast that enjoy a special status. The recommendations of the Committee were partially incorporated. 2014 Constitutional Bill (122^nd Amendment) The Bill was to prepare laws for a Model GST, define principles that cover apportionment of IGST, identify goods and services to be excepted, specify bands of GST with floor rates, specify special provisions to J&K, Arunachal Pradesh, Himachal Pradesh, Uttarakhand, Sikkim, Manipur, Meghalaya, Mizoram, Nagaland and Tripura. Compensation to states in case of revenue loss 2011 Constitution Bill (115^th Amendment) There was no provision for compensation to states in case of revenue loss. Standing Committee Recommendations in 2013 A GST Compensation Fund was suggested that would come under the GST Council and would provide for compensation to those states that generate high tax revenues currently, and was to operate as an automatic and permanent mechanism. The recommendation was partially incorporated. 2014 Constitutional Bill (122^nd Amendment) The Bill provides for a law to be enacted to compensate states for any loss incurred as a result of implementing GST and the same was to be applicable for a period of five years.

GST Dispute Settlement Authority

2011 Constitution Bill (115^th Amendment) The Bill provides for creating a GST Dispute Settlement Authority that will be mandated to settle disputes between the centre and states on account of revenue losses or any decision impacting the harmonized structure of taxes. The three-member authority was to comprise a retired Supreme Court Judge or any Chief Justice of a High Court who would be appointed as Chairman, along with two other members who were subject matter experts in law, public affairs or economics. The Chief Justice of India was to make the recommendations for selecting the Chairman of the authority, while the GST Council was to recommend the remaining two members. All appointments were to be made by the President of India. For settlement of disputes, only the Supreme Court would have the jurisdiction to adjudicate. Standing Committee Recommendations in 2013 The Committee felt that the GST Dispute Settlement Authority would have powers overriding the state legislatures and the Parliament and therefore, recommended that the GST Council be empowered to settle such disputes. The recommendation was incorporated. 2014 Constitutional Bill (122^nd Amendment) The Bill dropped the provision for creating the GST Dispute Settlement Authority.

Items exempted from GST

2011 Constitution Bill (115^th Amendment) Items excluded from the GST regime included crude petroleum, petrol, high speed diesel, aviation turbine fuel, natural gas and alcoholic liquor. Standing Committee Recommendations in 2013 The Committee recommended that special exclusions need not be covered under the Bill amendment since it was already under the purview of the GST Council which had powers to exempt items from GST. The recommendations were not incorporated. 2014 Constitutional Bill (122^nd Amendment) Alcoholic liquor has been exempted from GST under this Bill. However, items suggested for exemption in the 2011 Bill have been referred to the GST Council to decide when the GST was to apply. Taxes on entertainment and amusement 2011 Constitution Bill (115^th Amendment) The Sixth Schedule of the constitution was amended which delegated powers to respective District Councils to levy taxes on amusement and entertainment. 2014 Constitutional Bill (122^nd Amendment) The Bill retained the provisions as in 2011 Bill. Excise duty on manufactured goods 2011 Constitution Bill (115^th Amendment) List 1 of the Seventh Schedule of the Constitution was amended to give the central government the power to levy excise duty on crude petroleum, petrol, high speed diesel, aviation turbine fuel, natural gas and tobacco and related products. The list excluded taxes on services, newspapers and newspaper advertisements. 2014 Constitutional Bill (122^nd Amendment) The Bill retained the provisions as in 2011 Bill. Taxes on items of interstate trade 2011 Constitution Bill (115^th Amendment) List II of the Seventh Schedule of the Constitution was amended to included powers to states to levy an entry tax on goods entering the state but restricted the amount to the existing levy by a Panchayat or Municipality. It empowered the state governments to levy tax on crude petroleum, petrol, high speed diesel, aviation turbine fuel, natural gas and alcoholic liquor. The Bill left out entry relating to taxes on advertisements, except those in newspapers and electronic media. The Bill replaced entry on luxuries that included taxes levied as per existing Panchayat or municipality level on betting & gambling, amusement and entertainment. Standing Committee Recommendations in 2013 The Committee recommended that the entry tax be absorbed into the GST and states be allowed to collect entry tax to be redistributed to respective local bodies. The recommendations were incorporated. 2014 Constitutional Bill (122^nd Amendment) The Bill removed the provision allowing states to levy entry tax on goods entering local area. The remaining provisions as provided in 2011 Bill was retained unchanged. Read More Krishi Kalyan Cess Swachh Bharat Cess on Service Tax Corporate Tax in India Indo-US Tax Information Exchange Agreement What is GST: How will it change India Tax Relief Bonanza New tax to reduce beverage consumption in India Tax filing for NRIs New GST regime and its future impact on telecom industry in India Revised GST Rate List Different GST Return Forms

Comparison of Goods and Services Tax Bill under UPA II and NDA

Introduction of GST

2014 Constitutional Bill (122nd Amendment)

2011 Constitution Bill (115th Amendment)