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GST - Constitutionally

DDT in Limca Book of Records - Third Time in a rowTIOL-DDT 2906
09 08 2016
Tuesday

I am one of those incorrigible optimists who believed that GST will not come in the next five years, but now my hopes seem to have been dashed. GST appears to have crossed the horizon into the realm of reality.

The Constitutional Amendment Bill was passed by Lok Sabha on the 6th May, 2015 and transmitted to Rajya Sabha for concurrence. Rajya Sabha passed the Bill with amendments at its sitting held on the 3rd August, 2016 and returned it to Lok Sabha on 4th August, 2016. And the Lok Sabha approved the amendments yesterday.

What does the Constitution amendment propose to achieve?

1. A new Article 246A is added to the Constitution which stipulates that notwithstanding anything contained in articles 246 and 254, Parliament, and, the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State. Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. Article 246 deals with the powers of the Centre and the States to make laws as per the Union List, the State List and the Concurrent List. Article 254 deals with the supremacy of the laws made by Parliament.

2. A new Article 246A is added to the Constitution which stipulates that Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States and that such apportioned amounts shall not be part of the Consolidated Fund of India or the States. This is said to be for ease of transfer of funds.

3. Article 270 is amended to provide for distribution of the GST collected by the Central Government between the Centre and the States.

4. As per Article 271 surcharge on taxes is not shareable and remains with the Centre. Now this article is amended to exclude GST from its purview.

5. A new Article 279A is added for constitution of the GST Council.

6. Article 366 is amended to define "goods and services tax" as any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption; and to define services as anything other than goods.

7. Seventh Schedule is amended to substitute entry 84 in Union List dealing with excise duty. Now excise duty can be levied on petroleum crude;

(a) petroleum crude

(b) high speed diesel;

(c) motor spirit (commonly known as petrol);

(d) natural gas;

(e) aviation turbine fuel; and

(f) tobacco and tobacco products

Service tax is omitted;

From the State list, sales tax, entry tax and entertainment tax omitted.

8. States to be compensated for loss of revenue due to implementation of GST, for a period of five years.

What the Rajya Sabha Amended and Lok Sabha Accepted

THIS is a summary of the amendments made by Rajya Sabha in the Bill passed by Lok Sabha in May 2015 and accepted by the Lok Sabha yesterday.

Provisions of the Bill Amendments
BE it enacted by Parliament in the Sixty-sixth Year of the Republic of India as follows:— for the word "Sixty-sixth", the word "Sixty-seventh" be substituted.
1. (1) This Act may be called the Constitution (One Hundredth Amendment) Act, 2015. for the words, bracket and figure "the Constitution (One Hundredth Amendment) Act, 2015", the words, bracket and figure "the Constitution (One Hundred and First Amendment) Act, 2016" be substituted.

9. After article 269 of the Constitution, the following article shall be inserted, namely:-

 

GST on InterState trade or commerce

‘‘269A. (1) Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council.

Explanation.- For the purposes of this clause, supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce.

the following be inserted, namely:- "(2) The amount apportioned to a State under clause (1) shall not form part of the Consolidated Fund of India. (3) Where an amount collected as tax levied under clause (1) has been used for payment of the tax levied by a State under article 246A, such amount shall not form part of the Consolidated Fund of India. (4) Where an amount collected as tax levied by a State under article 246A has been used for payment of the tax levied under clause (1), such amount shall not form part of the Consolidated Fund of the State.

10. In article 270 of the Constitution,—

(i) in clause (1), for the words, figures and letter "articles 268, 268A and 269", the words, figures and letter "articles 268, 269 and 269A" shall be substituted;

(ii) after clause (1), the following clause shall be inserted, namely:-

‘‘(1A) The goods and services tax levied and collected by the Government of India, except the tax apportioned with the States under clause (1) of article 269A, shall also be distributed between the Union and the States in the manner provided in clause (2).''.

the following be substituted for (ii), namely:- ‘(ii) after clause (1), the following clauses shall be substituted, namely:- "(1A) The tax collected by the Union under clause (1) of article 246A shall also be distributed between the Union and the States in the manner provided in clause (2). (1B) The tax levied and collected by the Union under clause (2) of article 246A and article 269A, which has been used for payment of the tax levied by the Union under clause (1) of article 246A and the amount apportioned to the Union under clause (1) of article 269A, shall also be distributed between the Union and the States in the manner provided in clause (2).".'.

12. After article 279 of the Constitution, the following article shall be inserted, namely:-


GST Council

‘‘279A. (1) The President shall, within sixty days from the date of commencement of the Constitution (One Hundredth Amendment) Act, 2015, by order, constitute a Council to be called the Goods and Services Tax Council.

for the words, bracket and figure "the Constitution (One Hundredth Amendment) Act, 2015", the words, bracket and figure "the Constitution (One Hundred and First Amendment) Act, 2016" be substituted.

12(4) The Goods and Services Tax Council shall make recommendations to the Union and the States on -

(a) the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the goods and services tax;

(b) the goods and services that may be subjected to, or exempted from the goods and services tax;

(c) model Goods and Services Tax Laws, principles of levy, apportionment of Integrated Goods and Services Tax and the principles that govern the place of supply;

for the words "Integrated Goods and Services Tax", the words, figure and alphabet "Goods and Services Tax levied on supplies in the course of inter-State trade or commerce under article 269A" be substituted.
12(11) The Goods and Services Tax Council may decide about the modalities to resolve disputes arising out of its recommendations.

the following be substituted, namely:- "(11) The Goods and Services Tax Council shall establish a mechanism to adjudicate any dispute -

(a) between the Government of India and one or more States; or

(b) between the Government of India and any State or States on one side and one or more other States on the other side; or

(c) between two or more States, arising out of the recommendations of the Council or implementation thereof."

18. (1) An additional tax on supply of goods, not exceeding one per cent, in the course of inter-State trade or commerce shall, notwithstanding anything contained in for assignment clause (1) of article 269A, be levied and collected by the Government of India for a period of two years or such other period as the Goods and Services Tax Council may recommend, and such tax shall be assigned to the States in the manner provided in sub-section (2). Clause 18 omitted
19. Parliament may, by law, on the recommendation of the Goods and Services Tax Council, provide for compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for such period which may extend to five years. for the word "may", the word "shall" be substituted. for the words "such period which may extend to", the words "a period of" be substituted.

Refunds - Unjust Enrichment - CBEC Issues Draft Circular

CBEC proclaims that the principle of unjust enrichment is not applicable in following cases:

1. duty paid on exports;

2. duty paid on inputs / input services used in the manufacture of exported goods / for provision of exported services;

3. unspent balance lying in PLA.

In order to bring uniformity in the application of the principle of unjust enrichment,Board has indicated the accounting and documentation requirements which are to be adhered to, in the various refund scenarios which are likely to be encountered.

Balance Sheet of the applicant for the financial year in which the duty amount claimed as refund has been paid or credit note has been issued, should indicate the refund amount as "Duty Receivable" under the heading "Current Assets".

(It does not matter whether the differential duty/tax amount is reflected in the "Duty Receivable" account, invoice wise or a consolidated journal entry is passed at the end of the financial year. The consolidated entry, however, must reflect the invoices in respect of which the differential amount is being transferred to "Duty Receivable" Account.)

Balance Sheet of the subsequent financial year(s) after the financial year in which duty/tax was reflected as "duty receivable"' till the financial year preceding the financial year in which refund is proposed to be sanctioned, should continue to show the amount as "Duty Receivable" under the heading "Current Assets".

The certificates indicated as part of the documentary requirements would be self-certified by the applicants in all cases where the duty amount being claimed as refund amount is Rs. 25 lakhs or less. In cases, however, where the duty amount being claimed as refund is more than Rs. 25 lakhs, the certificates would be required to be certified by a Chartered Accountant / Cost & Management Accountant.

Board would like to clarify that the provisions of Section 11B of CEA are not applicable in case of refund of pre-deposit amount and, therefore, the principle of unjust enrichment is not applicable in such cases.

Board wants feedback to be sent to commr.st-cbec@nic.in or sreeparvathy.sl@gov.in or mittal.drgaurav@gov.in by 6th September 2016.

CBEC Draft Circular Dated: August - 2016

Anti Dumping Notifications Issued

GOVERNMENT has issued the following notifications:

Sl.No
Notification No. and date
Description
1
39/2016-Cus (ADD), dt. 08-08-2016 Extends the levy of anti-dumping duty on imports of Sodium Nitrite, originating in, or exported from People's Republic of China, (imposed vide notification No.46/2014-Customs(ADD), dated 8th December, 2014) for a period of one year i.e. upto and inclusive of the 16th August, 2017.
2
40/2016-Cus (ADD) dt. 21-06-2016 Extends the levy of anti-dumping duty on imports of certain Rubber Chemicals, namely MBTS [Dibenzothiazoledisulphide] originating in, or exported from, People's Republic of China, (imposed vide notification No. 98/2011-Customs, dated 20th October, 2011) for a period of one year i.e. upto and inclusive of the 19th October, 2017.
3
41/2016-Cus (ADD), dt. 08-08-2016 Finalizes the provisional assessments in respect of imports of PVC Flex Film, originating in or exported from China PR by M/s Haining Tianfu Warp Knitting Co. Ltd., People's Republic of China (Producer) and M/s Manna, Korea RP (Exporter), at rate of anti-dumping duty imposed vide Notification No. 82/2011-Customs (ADD) dated 25th August, 2011 [and extended vide Notification No. 43/2015-Customs (ADD) dated 18th August, 2015].
4
42/2016-Cus (ADD), dt. 08-08-2016 Imposes anti-dumping duty on the imports of PVC Flex Film originating in or exported from the People's Republic of China for a period of five years
5
43/2016-Cus (ADD), dt. 08-08-2016 Imposes anti-dumping duty on the imports of Viscose Staple Fibre excluding Bamboo Fibre originating in or exported from People's Republic of China and Indonesia for a period of five years.
6
44/2016-Cus (ADD), dt. 08-08-2016 To levy provisional anti-dumping duty on Hot-rolled products of alloy or non-alloy steel imported from China, Japan, Korea RP, Russia, Brazil and Indonesia.

Limitation When No Limitation is stipulated in Statute

WHAT is the limitation for issuing a Show Cause Notice if the statute does not stipulate a limitation?

In a judgement delivered yesterday, the Supreme Court observed,

Insofar as contention of the assessee that the impugned notification is time barred, it is difficult to accept the same in the facts of the present case. At the outset, we have to keep in mind Rule 8 of the Rules which does not prescribe any period of limitation. No doubt, in such an eventuality, as held by this Court in Bhatinda District Co-op Milk P. Union Ltd, the show cause notice has to be issued within a reasonable period. However, for this purpose, provisions of Section 28 cannot be resorted to to state that it has to be within a period of 6 months. The question has to be decided keeping in view the facts of each case and to examine whether the period in question is reasonable or not. In the instant case, we find that it is only through intelligence collected by DRI, Gandhidham Regional Unit that it came to be revealed that the assessee had imported crude palm oil but it had no facility in manufacturing soap/Industrial Fatty Acid and was using the said imported crude palm oil for making edible products like refined oil/Vanaspati. At the time of import, the importer only gives declaration. It is the actual use, which event takes place much after the import, from where it can be gathered as to where the import is made for the purpose for which it was done. As soon as the aforesaid information was gathered by DRI, show cause notice was issued. Therefore, we are of the opinion that show cause notice had been issued within a reasonable period and it cannot be treated as time barred .

Does limitation start from the date of knowledge by the DRI?

For more details on this case, please see Breaking News.

The vagaries of the monsoon are less unpredictable than the whimsical changes in our tax laws.

Nani Palkhiwala

Until Tomorrow with more DDT

Have a nice day.

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