Wednesday, March 16, 2016

Gibes & Special interest Tax (GST) BILL

No matter what, GST Bill which is struggling to roll out is undoubtedly a good peace of legislation.

Every one who has gone through GST Bill has their own reservations. Its not wrong to have reservations. But one should have a solution that is implementable irrespective of time frame. A solution that is free from bias, free from political interests, free from scope for manipulation.

Three most debatable reservations are 1. Ceiling on GST Rate in Constitution 2. Abolishing proposed entry tax 1% which was proposed for maximum of 2 years from implementation 3. A satisfactory dispute resolution mechanism

2 and 3 are good ones which definitely can be considered as they enable GST for achieving its purpose of eliminating Cascading effect and better dispute resolution mechanism.
Leave aside 2 and 3,  as they were already being considered by Government.

 Ceiling on GST rate in Constitution. Lets have a look at this.

Capping the GST Rate is not a bad idea. But the condition that GST Rate should be capped in Constitution is irrational, insane.

Article 246 of the Indian Constitution, distributes legislative powers including taxation, between the Parliament of India and the State Legislature. Schedule VII enumerates these subject matters with the use of three lists:
  • List - I entailing the areas on which only the parliament is competent to make laws,
  • List - II entailing the areas on which only the state legislature can make laws, and
  • List - III listing the areas on which both the Parliament and the State Legislature can make laws upon concurrently.
Separate heads of taxation are no head of taxation in the Concurrent List (Union and the States have no concurrent power of taxation). The list of thirteen Union heads of taxation and the list of nineteen State heads are given below:

Central government of India

S. No.Parliament of India
1Taxes on income other than agricultural income (List I(Union List), Entry 82)
2Duties of customs including export duties (List I(Union List), Entry 83)
3Duties of excise on tobacco and other goods manufactured or produced in India except (i) alcoholic liquor for human consumption, and (ii) opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any substance included in (ii). (List I(Union List), Entry 84)
4Corporation Tax (List I(Union List), Entry 85)
5Taxes on capital value of assets, exclusive of agricultural land, of individuals and companies, taxes on capital of companies (List I(Union List), Entry 86)
6Estate duty in respect of property other than agricultural land (List I(Union List), Entry 87)
7Duties in respect of succession to property other than agricultural land (List I(Union List), Entry 88)
8Terminal taxes on goods or passengers, carried by railway, sea or air; taxes on railway fares and freight (List I(Union List), Entry 89)
9Taxes other than stamp duties on transactions in stock exchanges and futures markets
10Taxes on the sale or purchase of newspapers and on advertisements published therein
11Taxes on sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce
12Taxes on the consignment of goods in the course of inter-State trade or commerce
13All residuary types of taxes not listed in any of the three lists of Seventh Schedule of Indian Constitution

State governments

S. No.State Legislate
1Land revenue, including the assessment and collection of revenue, the maintenance of land records, survey for revenue purposes and records of rights, and alienation of revenues (List II, Entry 45)
2Taxes on agricultural income (List II, Entry 46)
3Duties in respect of succession to agricultural land (List II, Entry 47)
4Estate Duty in respect of agricultural land (List II, Entry 48)
5Taxes on lands and buildings (List II, Entry 49)
6Taxes on mineral rights (List II, Entry 50)
7Duties of excise for following goods manufactured or produced within the State (i) alcoholic liquors for human consumption, and (ii) opium, Indian hemp and other narcotic drugs and narcotics (List II, Entry 51)
8Taxes on entry of goods into a local area for consumption, use or sale therein (see Value added tax) (List II, Entry 52)
9Taxes on the consumption or sale of electricity (List II, Entry 53)
10Taxes on the sale or purchase of goods other than newspapers (List II, Entry 54)
11Taxes on advertisements other than advertisements published in newspapers and advertisements broadcast by radio or television (List II, Entry 55)
12Taxes on goods and passengers carried by roads or on inland waterways (List II, Entry 56)
13Taxes on vehicles suitable for use on roads (List II, Entry 57)
14Taxes on animals and boats (List II, Entry 58)
15Tolls (List II, Entry 59)
16Taxes on profession, trades, callings and employments (List II, Entry 60)
17Capitation taxes (List II, Entry 61)
18Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling (List II, Entry 62)
19Stamp duty (List II, Entry 63)
Any tax levied by the government which is not backed by law or is beyond the powers of the legislating authority may be struck down as unconstitutional.

More details about various heads of taxes can be known in the following link

Out of ALL ENTRIES RELATING TO TAXES in Seventh Schedule of Constitution of India whether it is UNION List ot STATE List, only 1 TAX has got ceiling mentioned in Constitution of India - TAX ON PROFESSIONS, TRADE, CALLINGS & EMPLOYMENT has ceiling of Rs. 2500/- per annum from any person. (increased from Rs.250/- vide constitutional amendment)

As a matter of Administrative Ease, it has been avoided.
Also as a matter of TRUST on the DEMOCRATIC principles enunciated in our Constitution which enables people to elect their representatives whom they believe to act in best interest of general public.

Our beloved craftsmen of Constitution could have easily capped every entry relating to taxation with either specific or advalorem rate. But that was not so. They knew that scenario across the Globe can always impact INDIA either Positively or Negatively which requires immediate action by Union Government.

An Action which cannot be delayed for the want of CONSENSUS of all states. An action which is beneficial to Public at Large.

CONSTITUTION OF INDIA is Supreme legislation. It is principle based document. It outlines the rationale behind governance.

The Constitution declares India a sovereignsocialistsecular,[7] democratic republic, assuring its citizens of justiceequality, andliberty, and endeavors to promote fraternity among them

NOT a SCHEDULE IN INCOME TAX which specifies tax rates.

In the conclusion of his Making of India's Constitution, Justice Khanna writes:
"If the Indian constitution is our heritage bequeathed to us by our founding fathers, no less are we, the people of India, the trustees and custodians of the values which pulsate within its provisions! A constitution is not a parchment of paper, it is a way of life and has to be lived up to. Eternal vigilance is the price of liberty and in the final analysis, its only keepers are the people."[64

I SINCERELY REQUEST all the law makers
NOT TO CONFUTE just for the sake of argument.
NOT TO BE SKEPTIC just because you have to
NOT TO BE CYNICAL just because someone changed their stance on it over period of time

I take my time out to publish this, just because I believed that as a responsible Citizen of India
-- Its my DUTY TO BRING IT TO knowledge of AAM AADMI apart from right to express my view conferred by our constitution