Saturday, June 17, 2017

INTEGRATED GOODS AND SERVICES TAX (IGST)

Friends!
                Clause (2) of Article 246A of the Constitution of India empowers the Parliament for making law for levy of tax on supply of goods or of services or both where such supply takes place in the course of inter-State trade or commerce. The said clause (2) runs as follows:
"(2) 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 279A of the Constitution relates to levy and collection of goods and services tax on supplies in the course of inter-State trade or commerce. Clause (1) of the said Article 279A runs as follows:
"(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."
                Exercising these powers, the Parliament has enacted The Integrated Goods and Services Tax Act, 2017. The long title of the Act runs as "An Act to make a provision for levy and collection of tax on inter-State supply of goods or services or both by the Central Government and for matters connected therewith or incidental thereto" and the short title of the Act is "the Integrated Goods and Services Tax Act, 2017."  Section 5 of this Act relates to levy and collection of tax. Sub-section (1) of this Act runs as follows:
"(1) Subject to the provisions of sub-section (2), there shall be levied a tax called the integrated goods and services tax on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 of the Central Goods and Services Tax Act and at such rates, not exceeding forty per cent, as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person:
                Provided that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 (51 of 1975) on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962 (52 of 1962)."
                Here I will limit my discussion to taxable event or event for levy of tax as given in the Constitution and in section 5 of the Integrated Goods and Services Tax Act, 2017. In the Constitution, taxable event is "on supplies in the course of inter-State trade or commerce" and scope of this event has been extended by adding explanation to include "supply of goods, or of services, or both in the course of import into the territory of India". In sub-section (1) of section 5 of the IGST Act, taxable event is "on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption". In relation to goods imported into India, proviso has been enacted.
                According to long title of the Act and charging section, which is section 5 of the Act, tax has been levied on "inter-State supplies of goods or services or both". Articles 246A (2) and 269A empower the parliament for enacting law on supply of goods or of services or both where such supply takes place in the course of inter-State trade or commerce. Expression "inter-State supply of goods or services or both" is wide enough to cover those supplies, also, which cannot be said "in the course of inter-State trade or commerce.  For example, a father, located at Kanpur in Uttar Pradesh, sends his laptop to his son located at Mumbai, Maharashtra, for his personal use. This is an inter-State supply but such supply cannot be said an inter-State supply in the Course of inter-State trade or commerce.
                Title of section 7 of the IGST Act is "Inter-State supply". But section does not provide which transactions shall be treated "inter-State supply". Various sub-sections of this section, provides that which transactions of supply of goods or services or both shall be treated a supply of goods or of services or both in the course of inter-State trade or commerce. Sub-section (1) of this section runs as follows:
"(1) Subject to the provisions of section 10, supply of goods, where the location of the supplier and the place of supply are in—
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory,
shall be treated as a supply of goods in the course of inter-State trade or commerce."
                We can put the above clause in another way as follows:
(1) "Supply of goods in the course of inter-State trade or commerce", means a supply with respect to which, supplier of goods and subject to provisions of section 10, place of supply of goods are located in-
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory.
                Definition of word "supplier" as under:
"(105) “supplier” in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied;"
                According to definition, "supplier" may be any person who makes a supply of goods or services or both and supplier is not limited to only those persons who supply goods or services or both in the course of trade or commerce. Definition of word "person" is also not in reference to business.
                In view of the above, I am of the view that section 5 of the IGST Act, in the shape its sub-section (1) has been enacted, is not proper. Definition clauses, given in section 7, are also not valid. A supply of export nature has also been included in section 7. In reference to supply by or to SEZ unit or SEZ developer where SEZ and supplier or recipient both are located within the same State, transaction has been defined as supply in the course of inter-State trade or commerce. By doing so powers of States (Article 246A) have been curtailed.




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