Constitutional Framework of GST

Goods and Services Tax (GST) in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. It was introduced to consolidate and subsume a variety of previous taxes into a single tax system, aiming to make tax administration more efficient and to boost the overall economy. The constitutional framework of GST in India is a key aspect that allowed for its implementation and ongoing governance.

1. 101st Amendment of the Constitution:

The introduction of GST in India was facilitated by the 101st Amendment of the Constitution of India, enacted in 2016. This amendment made it possible for the central and state governments to levy and collect the GST.

2. GST Council:

The amendment led to the creation of the GST Council, a governing body that has been vested with the powers to make recommendations to the Union and the States on various issues related to GST, such as rates, exemptions, thresholds, and more. The Council is chaired by the Union Finance Minister and includes the Minister of State in charge of Revenue or Finance and Ministers in charge of Finance or Taxation from all the states and union territories.

3. Division of GST:

GST is divided into three categories:

• CGST (Central GST): Levied and collected by the Central Government on intra-state supplies.
• SGST (State GST): Levied and collected by the State Governments on intra-state supplies.
• IGST (Integrated GST): Levied and collected by the Central Government on inter-state supplies and imports.

4. Concurrent Powers:

The 101st Amendment provided both the Union and the States with concurrent powers to legislate on GST. This was a significant move since, historically, certain aspects of taxation were exclusively within the domain of either the central or state governments.

5. Special Provisions:

The amendment also included provisions for compensation to states for loss of revenue arising on account of the implementation of GST for a period of five years, ensuring that states were on board with the new tax regime despite potential short-term revenue uncertainties.

6. Removal of Indirect Taxes:

With the introduction of GST, a multitude of central and state indirect taxes were subsumed into one tax, including taxes such as VAT, excise duty, service tax, and additional customs duty.

7. Article 279A:

This article was inserted into the Constitution to facilitate the creation of the GST Council. It outlines the powers and the manner of functioning of this body.

The constitutional framework of GST in India represents a significant reform in the Indian tax system, aiming at creating a single national market by breaking the barriers between states and integrating the country through a uniform tax rate. This framework not only supports the principle of cooperative federalism but also aims to enhance the ease of doing business in India.