Highlights of the Bill

  • The Bill seeks to amend the Constitution to provide for the introduction of a Goods and Services Tax (GST).
  • The Bill allows both Parliament and state legislatures to frame laws with respect to GST.  Parliament will have the exclusive power to levy GST on imports and inter-state trade.
  • The Bill creates a Goods and Services Tax Council consisting of state Finance Ministers, the Union Finance Minister, and Union Minister of State for Revenue to make recommendations with respect to GST.
  • The Bill provides for a Dispute Settlement Authority to settle disputes between states or between states and the Union with regard to GST. Appeals from the Authority lie with the Supreme Court.
  • The Bill exempts certain commodities from GST, including petroleum products and alcoholic liquor for human consumption.

Key Issues and Analysis

  • The GST Council will recommend harmonised tax rates, and disputes regarding these rates will be adjudicated by the Dispute Settlement Authority (with appeal to the Supreme Court).  This structure, in which executive and judicial bodies determine tax rates, may impinge on the rights of legislatures.
  • The Bill seeks to amend the Constitution to provide that Parliament and state legislatures may both frame laws with regard to GST without providing for Parliamentary supremacy.  
  • The GST Council shall make all decisions by “consensus”.  It is unclear whether this may be interpreted as majority or unanimity.
  • The exclusion of certain commodities from GST is contrary to the recommendations of the Thirteenth Finance Commission and Department of Revenue.
  • The Bill constitutionally requires a “Union Finance Minister” and “Union Minister of State in charge of Revenue”.  This could undermine the flexibility of the Prime Minister in forming a Council of Ministers.

Read the complete analysis here