Proposed law




In an important development towards India’s progress into a nationwide unified market and removing trade obstacles  in the form of cascading effects of taxation, the Central Government tabled the 122nd Constitution Amendment Bill, 2014 on the introduction of Goods and Services Tax  before the lower house of Parliament on December 19, 2014. This Bill replaces an earlier bill introduced.


GST will simplify and harmonize the indirect tax regime in the country. GST will broaden the tax base, and result in better tax compliance due to a robust IT infrastructure and manufacturing sector. Due to the seamless transfer of input tax credit from one state to another in the chain of value addition, there is an in-built mechanism in the design of GST that would incentivize tax compliance by traders. It is thus, expected that introduction of GST will foster a common and seamless Indian market which leads to more production of goods and contribute significantly to the growth of the economy.


The Bill proposes to replace the current Indian tax regime which is multi-tiered. Currently, the Centre imposes excise duty on manufacture of goods, and service tax on provision of services (other than customs duty on imports). The current tax structure is much complicated and time consuming .The States separately impose Value Added Tax (VAT) on the supply of goods and a portfolio of specific taxes such as entertainment tax, excise.



GST is a long pending bill. It is officially 122nd constitutional amendment bill. The GST bill gained support of most of state governments while some refusing for this because they losing a large amount of state taxes. Central government compensating for five years for the loss.


GST Council


The Bill proposes that the GST Council shall recommend for setting up of an Integrated GST (IGST). A new Article 246A is proposed which will confer simultaneous power to Union and State legislatures to legislate on GST. Article 246A constitutes a GST council. GST council will be a body which will regulate the regulations regarding taxes .Only the centre may levy and collect GST on supplies in the course of inter-state trade or commerce. The tax collected would be divided between the centre and the states in a manner to be provided by Parliament, by law, on the recommendations of the GST Council.


The GST Council is to consist of the following three members:

(i) The Union Finance Minister (as Chairman),

(ii) The Union Minister of State in charge of Revenue or Finance, and

(iii) The Minister in charge of Finance or Taxation or any other, nominated by each state government.


To whom it apply -

GST will be levied on buyers of goods and services, or where the service is consumed. This means big consumer states such as Uttar Pradesh, West Bengal and Kerala will get a high share of the taxes. To compensate for this, manufacturing states such as Tamil Nadu, Maharashtra and Gujarat fear that they will lose out on revenues. The bill provides for 1 percentage point extra tax on goods for at least two years. This extra revenue will go to the state from which the goods originated, or where it was manufactured.



Key Features


The Bill proposes that both the Centre and States would be entitled to concurrently impose GST on the supply of goods and services within a State. Effectively, every supply of goods and services would be subjected to a Central GST (CGST) and State GST (SGST) on....

• A new Article 246A is proposed which will confer simultaneous power to Union and State legislatures to legislate on GST.


• A new Article 279A is proposed for the creation of a Goods & Services Tax Council which will be a joint forum of the Centre and the States. This Council would function under the Chairmanship of the Union Finance Minister and will have Ministers in charge of Finance/Taxation or Minister nominated by each of the States & UTs with Legislatures, as members. The Council will make recommendations to the Union and the States on important issues like tax rates, exemptions, threshold limits, dispute resolution modalities etc.


• It is proposed to do away with the concept of ‘declared goods of special importance’ under the Constitution.



• Centre will compensate States for loss of revenue arising on account of implementation of the GST for a period up to five years. A provision in this regard has been made in the Amendment Bill (The compensation will be on a tapering basis, i.e., 100% for first three years, 75% in the fourth year and 50% in the fifth year).


The proposed GST has been designed keeping in mind the federal structure enshrined in the Constitution and will have the following important features:


• Central taxes like Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty (CVD) and Special Additional Duty of Customs (SAD), etc. will be subsumed in GST.


• At the State level, taxes like VAT/Sales Tax, Central Sales Tax, Entertainment Tax, Octroi and Entry Tax, Purchase Tax and Luxury Tax, etc. would be subsumed in GST.


• All goods and services, except alcoholic liquor for human consumption, will be brought under the purview of GST. Petroleum and petroleum products have also been Constitutionally brought under GST. However, it has also been provided that petroleum and petroleum products shall not be subject to the levy of GST till notified at a future date on the recommendation of the GST Council. The present taxes levied by the States and the Centre on petroleum and petroleum products, i.e., Sales Tax/VAT, CST and Excise duty only, will continue to be levied in the interim period.


• Both Centre and States will simultaneously levy GST across the value chain. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State.


• The Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supply of goods and services. There will be seamless flow of input tax credit from one State to another. Proceeds of IGST will be apportioned among the States.


• GST is a destination-based tax. All SGST on the final product will ordinarily accrue to the consuming State.


• GST rates will be uniform across the country. However, to give some fiscal autonomy to the States and Centre, there will a provision of a narrow tax band over and above the floor rates of CGST and SGST.


• It is proposed to levy a non-vatable additional tax of not more than 1% on supply of goods in the course of inter-State trade or commerce. This tax will be for a period not exceeding 2 years, or further such period as recommended by the GST Council. This additional tax on supply of goods shall be assigned to the States from where such supplies originate.



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