Tax slabs: Should GST Bills be tabled as Money Bills?

Published: March 27, 2017 5:22:13 AM

In spite of encouraging results of the recently concluded state elections, the government still lacks the quintessential majority in the Rajya Sabha, and there is a race against time to ensure the roll out of GST by July 1

The attempts at accommodating the concerns of various sectors have not withered the broad framework of GST, which continue to remain intact. (Reuters)

The approval of the draft Bills of the Central Goods and Service Tax (CGST), Union Territories GST (UTGST), Integrated GST (IGST), and compensation to the state laws by the Union Cabinet, has paved way for operationalising the government’s reverie GST project?by July 1, 2017. In the past few months, the GST?Council?has made considerable progress, ensuring adherence to the deadlines for implementation of this landmark tax reform.

The approval of four draft Bills by the GST Council in the last few weeks and the subsequent clearance by the Union Cabinet on March 20, 2017, fortify the belief in the time-lines announced by the finance minister during the Union Budget speech. While the GST will continue to invite debate and prognostication by the experts, the blessings of the new tax regime in the long run cannot be ruled out.

The attempts at accommodating the concerns of various sectors have not withered the broad framework of GST, which continue to remain intact. These consultations by the GST Council have been instrumental in resolving the issues concerning dual control, power over territorial waters, composition tax, cesses and compensation to states. It is encouraging to learn that the Council has finalised the compliance procedures of registration, tax payment, invoice, refund and returns. The pending four rules with respect to valuation, credits, transition and composition under the new regime are expected to receive the formal approval of the Council by March 31, 2017.

The crucial debate at this juncture, however, is with regard to the means that are likely to be employed to clear the Union Bills in Parliament.

GST is implemented through multiple statutes—IGST Act, single CGST Act and SGST statute for every state. It should be noted that Parliament will have to clear both the CGST and IGST Bills, while the SGST Bill will go to respective state assemblies. There was a debate in the Rajya Sabha whether the CGST and IGST Bills will be presented as Money Bills or Finance Bills. In light of the provisions of Article 110 and Article 117 of the Constitution, the Opposition wanted these Bills to be introduced as Finance Bills. The finance minister did not give any certain answer on August 3, 2016, but merely assured that all the constitutional provisions would be kept in mind at the time of tabling these Bills. The strong logic at that point was that no assurance can be provided as the nuances of the Bills were not known.

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Now, it must be noted that there are three kinds of Bills: Money Bills, Financial Bills category-I and Financial Bills category-II.

In simple words, Financial Bill is a bigger bucket than Money Bill. The Opposition in the Rajya Sabha had voiced that these Bills should be considered Finance Bills as they do not deal with matters listed in Article 110, and Money Bills contain provisions exclusively on matters listed in Article 110. Besides, there are certain attributes categorising a Bill as Money Bill:

  •  It results in imposition, abolition, remission, alteration or regulation of any tax at Union or state level, but not at local level. Thus, Money Bills exist in Parliament and state legislatures only. If a Finance Bill results in imposition, abolition, remission, alteration or regulation at local level by a local body, it is not considered to be a Money Bill.
  • It results in regulation of borrowing of money or results in any guarantee by the government of India.
  • It results in withdrawal of money from Consolidated or Contingency Funds.
  • There is receipt of money in Consolidated Fund and public account.

In spite of encouraging results of the recently concluded state elections, the government still lacks the quintessential majority in the Rajya Sabha, and there is a race against time to ensure the roll out of GST by July 1. As a corollary, the Money Bill route seems to be the likely choice for the government. The position of the government is further strengthened by the constitutional legitimacy of this move.

While the debate on the mechanism to table the Bills may continue, the most crucial development remains the finalisation of the tax slabs. The anti-profiteering measures are giving uncertainty to businesses which are struggling with their pricing policy. It is hoped that both the government and industry pragmatically address the issues surrounding the new tax which will form the basic foundation of taxes in a new India.

(With inputs from Ajay Singh, associate)

The author, Abhishek A Rastogi is partner, Khaitan & Co

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