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No legal infirmity in GST notifications

The Centre on Monday said its recent notifications, setting up the GST Council and putting into immediate effect 19 sections of the Constitutional Amendment Act for Goods and Services Tax, do not bar it from levying excise duty on goods other than petroleum and tobacco.

By: | New Delhi | Updated: September 20, 2016 7:03 AM
The GST, as a comprehensive indirect tax on consumption, will subsume most of the current levies, including the excise, service tax, state VAT and the taxes on imports in lieu of domestic levies. (FE) The GST, as a comprehensive indirect tax on consumption, will subsume most of the current levies, including the excise, service tax, state VAT and the taxes on imports in lieu of domestic levies. (FE)

The Centre on Monday said its recent notifications, setting up the GST Council and putting into immediate effect 19 sections of the Constitutional Amendment Act for Goods and Services Tax, do not bar it from levying excise duty on goods other than petroleum and tobacco. It wasn’t clear whether this stance was in the light of the Article 19 of the Amendment or Entry 97 of List 1.

“The (department of revenue) examined the validity and implications of (notifications) dated 10th and 16th Sept wrt existing taxes imposed by the Union and states (sic),” and “there is no legal infirmity in these notifications (sic),” revenue secretary Hasmukh Adhia tweeted, after meeting law secretary, Suresh Chandra in this regard.

As per the Constitutional change, while tobacco is meant to be permanently exempt from GST and petroleum till a date notified on the Council’s recommendation, experts have noted that changing entry 84 of the Union List with effect from September 16, 2016 implies that the Centre cannont levy excise duty on any good other than petroleum and tobacco forthwith. While Adhia said the law department saw “no legal requirement to issue any further clarification or notification in this regard,” it wasn’t clear whether this was in the light of the Article 19 of the Constitutional Amendment that, experts said, could offer a way out since it exempts any existing taxes on goods or services ‘in force in any State immediately before the commencement of this Act’ for a period of one year.

Alternatively, the Centre might rely on Entry 97 of List 1 to continue to levy excise duties on products other than petroleum and tobacco till the GST is brought in, as it has done in the case of service tax.

However, as far as Article 19 of the Constitutional Amendment is concerned, the applicability is to “taxes in states” and it is debatable whether this could include excise duty.

The GST, as a comprehensive indirect tax on consumption, will subsume most of the current levies, including the excise, service tax, state VAT and the taxes on imports in lieu of domestic levies.

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