GST legislation to be discussed soon between Pranab, Moily     

With the government yet to finalise the legislation for the introduction of the goods and services tax (GST), a ministerial-level consultation is being planned to speed up the process. Finance Minister Pranab Mukherjee will shortly meet his counterpart in the law ministry to discuss the Constitutional amendment for introducing GST.

The government wants to ensure the basic structure of the Constitution is not changed in the process of the amendment, sources said. “It is a very sensitive issue and the government does not want a situation where someone gets a chance to challenge it in the Supreme Court. If that happens, everything will fall apart,” the source added.

The meeting of Mukherjee with Law Minister Veerappa Moily was earlier scheduled for Tuesday, but postponed. “The issue has to be discussed at length. Another meeting will be scheduled for either this week or the next,” said a person familiar with the development. Senior officials from the two ministries will be present at the meeting.

It is essential to have a Constitutional amendment for empowering the Centre to levy tax on sale of goods and the states to levy service tax and tax on imports and other consequential issues. The law ministry has conveyed to the finance ministry that 10-15 amendments would be required in the Constitution for giving these powers to the Centre and the states.

The proposed amendment will address entries in the lists. Article 246 in Part XI of the Constitution defines matters on which the Centre and the states will have the authority to frame laws. These matters are enumerated in the Seventh Schedule, under Union, state and concurrent lists. At present, the Centre is entitled to tax manufacturing of goods and services, while states can tax only sale of goods. “While making the changes, the power of taxation of goods and services cannot be placed in the concurrent list, since in that case the central law will prevail over the state law. Central GST and state GST also cannot be explicitly listed in the respective lists, since specific taxes are not mentioned in the lists,” said an official.

The amendment is also likely to provide for an inter-state body with representation from the Centre for coordinating the GST implementation. Besides the Constitutional amendment, there will be a model GST Act which will need to be adopted by the Centre and the states for implementation of the new tax regime.

A state finance minister said it would take another 15-20 days to prepare the draft Bills. The process of Constitutional amendment is likely to take a few months. That Bill will first have to be examined by a select committee of Parliament and, if approved, then require the approval of state legislatures.