Yesterday, the government circulated certain official amendments to the Constitution (122nd Amendment) Bill, 2014 on GST.  The Bill is currently pending in Rajya Sabha.  The Bill was introduced and passed in Lok Sabha in May 2015.  It was then referred to a Select Committee of Rajya Sabha which submitted its report in July 2015.  With the Bill listed for passage this week, we explain key provisions in the Bill, and the amendments proposed. What is the GST? Currently, indirect taxes are imposed on goods and services.  These include excise duty, sales tax, service tax, octroi, customs duty etc.  Some of these taxes are levied by the centre and some by the states.  For taxes imposed by states, the tax rates may vary across different states.  Also, goods and services are taxed differently. The Goods and Services Tax (GST) is a value added tax levied across goods and services at the point of consumption.  The idea of a GST regime is to subsume most indirect taxes under a single taxation regime.  This is expected to help broaden the tax base, increase tax compliance, and reduce economic distortions caused by inter-state variations in taxes. What does the 2014 Bill on GST do? The 2014 Bill amends the Constitution to give concurrent powers to Parliament and state legislatures to levy a Goods and Services tax (GST).  This implies that the centre will levy a central GST (CGST), while states will be permitted to levy a state GST (SGST).  For goods and services that pass through several states, or imports, the centre will levy another tax, the Integrated GST (IGST). Alcohol for human consumption has been kept out of the purview of GST.  Further, GST will be levied on 5 types of petroleum products at a later date, to be decided by the GST Council.  The Council is a body comprising of Finance Ministers of the centre and all states (including Delhi and Puducherry).  This body will make recommendations in relation to the implementation of GST, including the rates, principles of levy, etc.  The Council is also to decide the modalities for resolution of disputes that arise out of its recommendations. States may be given compensation for any revenue losses they may face from the introduction of the GST regime.  Such compensation may be provided for a period of up to five years. Further, the centre may levy an additional tax, up to 1%, in the course of interstate trade.  The revenues from the levy of this tax will be given to the state from where the good originates.  Expert bodies like the Select Committee and the Arvind Subramanian Committee have observed that this provision could lead to cascading of taxes (as tax on tax will be levied).[i]  It also distorts the creation of a national market, as a product made in one state and sold in another would be more expensive than one made and sold within the same state. What are the key changes proposed by the 2016 amendments? The amendments propose three key changes to the 2014 Bill.  They relate to (i) additional tax up to 1%; (ii) compensation to states; and (iii) dispute resolution by the GST Council.

  • Additional tax up to 1% on interstate trade: The amendments delete the provision.
  • Compensation to states: The amendments state that Parliament shall, by law, provide for compensation to states for any loss of revenues, for a period which may extend to five years. This would be based on the recommendations of the GST Council.  This implies that (i) Parliament must provide compensation; and (ii) compensation cannot be provided for more than five years, but allows Parliament to decide a shorter time period.  The 2014 Bill used the term ‘may’ instead of ‘shall’.   The Select Committee had recommended that compensation should be provided for a period of five years.  This recommendation has not been addressed by the 2016 amendments.
  • Dispute resolution: The GST Council shall establish a mechanism to adjudicate any dispute arising out of its recommendations. Disputes can be between: (a) the centre vs. one or more states; (b) the centre and states vs. one or more states; (c) state vs. state.  This implies that there will be a standing mechanism to resolve disputes.

These amendments will be taken up for discussion with the Bill in Rajya Sabha this week.  The Bill requires a special majority for its passage as it is a Constitution Amendment Bill (that is at least 50% majority of the total membership in the House, and 2/3rds majority of all members present and voting).  If the Bill is passed with amendments, it will have to be sent back to Lok Sabha for consideration and passage.  After its passage in Parliament, at least 50% state legislatures will have to pass resolutions to ratify the Bill. Once the constitutional framework is in place, the centre will have to pass simple laws to levy CGST and IGST.  Similarly, all states will have to pass a simple law on SGST.  These laws will specify the rates of the GST to be levied, the goods and services that will be included, the threshold of the turnover of businesses to be included, etc.  Note that the Arvind Subramanian Committee, set up by the Finance Ministry, recommended the rates of GST that may be levied.  The table below details the bands of rates proposed.

Table 1: Rates of GST recommended by Expert Committee headed by Arvind Subramanian
Type of rate Rate Details
Revenue Neutral Rate 15% Single rate which maintains revenue at current levels.
Standard Rate 17-18% Too be applied to most goods and services
Lower rates 12% To be applied to certain goods consumed by the poor
Demerit rate 40% To be applied on luxury cars, aerated beverages, paan masala, and tobacco
Source: Arvind Subramanian Committee Report (2015)

Several other measures related to the back end infrastructure for registration and reporting of GST, administrative officials related to GST, etc. will also have to be put in place, before GST can be rolled out. [For further details on the full list of amendments, please see here.  For other details on the GST Bill, please see here.]

Yesterday, the Governor of Karnataka promulgated the Karnataka Protection of Right to Freedom of Religion Ordinance, 2022.  The Ordinance prohibits forced religious conversions.  A Bill with the same provisions as the Ordinance was passed by the Karnataka Legislative Assembly in December 2021.   The Bill was pending introduction in the Legislative Council. 

In the recent past, Haryana (2022), Madhya Pradesh (2021), and Uttar Pradesh (2021) have passed laws regulating religious conversions.  In this blog post, we discuss the key provisions of the Karnataka Ordinance and compare it with existing laws in other states (Table 2). 

What religious conversions does the Karnataka Ordinance prohibit?

The Ordinance prohibits forced religious conversions through misrepresentation, coercion, allurement, fraud, or the promise of marriage.  Any person who converts another person unlawfully will be penalised, and all offences will be cognizable and non-bailable.  Penalties for attempting to forcibly convert someone are highlighted in Table 1.  If an institution (such as an orphanage, old age home, or NGO) violates the provisions of the Ordinance, the persons in charge of the institution will be punished as per the provisions in Table 1.   

Table 1: Penalties for forced conversion 

Conversion of

Imprisonment

Fine (in Rs)

Any person through specified means

3-5 years

25,000

Minor, woman, SC/ST, or a person of unsound mind

3-10 years 

50,000

Two or more persons (Mass conversion)

3-10 years 

1,00,000

Sources: Karnataka Protection of Right to Freedom of Religion Ordinance, 2022; PRS.

Re-converting to one’s immediate previous religion will not be considered a conversion under the Ordinance.   Further, any marriage done for the sole purpose of an unlawful conversion will be prohibited, unless the procedure for religious conversion is followed.  

How may one convert their religion?

As per the Ordinance, a person intending to convert their religion is required to send a declaration to the District Magistrate (DM), before and after a conversion ceremony takes place.  The pre-conversion declaration must be submitted by both parties (the person converting their religion, and the religious converter), at least 30 days in advance.  The Ordinance prescribes penalties for both parties for failing to follow procedure.

After receiving the pre-conversion declarations, the DM will notify the proposed religious conversion in public, and invite objections to the proposed conversion for a period of 30 days.  Once a public objection is recorded, the DM will order an enquiry to prove the cause, purpose, and genuine intent of the conversion.  If the enquiry finds that an offence has been committed, the DM may initiate criminal action against the convertor.  A similar procedure is specified for a post-conversion declaration (by the converted person).  

Note that among other states, only Uttar Pradesh requires a post-conversion declaration and a pre-conversion declaration.

After the religious conversion has taken place, the converted person must submit a post-conversion declaration to the DM, within 30 days of the conversion.  Further, the converted person must also appear before the DM to confirm their identity and the contents of the declaration.   If no complaints are received during this time, the DM will notify the conversion, and inform concerned authorities (employer, officials of various government departments, local government bodies, and heads of educational institutions).  

Who may file a complaint?

Similar to laws in other states, any person who has been unlawfully converted, or a person associated to them by blood, marriage, or adoption may file a complaint against an unlawful conversion.   Laws in Haryana and Madhya Pradesh allow certain people (those related by blood, adoption, custodianship, or marriage) to file complaints, after seeking permission from the Court.  Note that the Karnataka Ordinance allows colleagues (or any associated person) to file a complaint against an unlawful conversion.

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*In Chirag Singhvi v. State of Rajasthan, the Rajasthan High Court framed guidelines to regulate religious conversions in the state.