Constitutional Validity of GST

Goods and Services Tax (GST) in India, implemented on July 1, 2017, is not only a significant overhaul of the indirect tax regime but also an important constitutional reform. The introduction of GST required an amendment to the Constitution of India, given that taxation powers were traditionally divided between the state and central governments. The constitutional validity of GST is rooted in the 101st Amendment of the Constitution of India, passed in 2016, which enabled the implementation of a nationwide GST.

The 101st Constitutional Amendment Act, 2016

This Amendment made several key changes to the Constitution to facilitate the introduction of GST:

1. Introduction of GST:

It introduced Article 246A, which grants simultaneous power to both the Parliament and state legislatures to legislate on GST. This was a groundbreaking change as it allowed for the uniform application of GST across all states and union territories.

2. GST Council:

Article 279A was introduced to constitute the GST Council. This council serves as a constitutional body that brings together the central and state governments to make recommendations on various GST-related issues, including rates, exemptions, and the model GST laws. The GST Council ensures a collaborative approach between the central and state governments, addressing one of the primary concerns regarding the federal structure of governance in India.

3. Special Provisions for Some States:

Provisions were also made under Articles 246A, 269A, and 279A to allow for special treatment for certain states, such as those in the Northeast and hilly regions. This ensured that the unique economic circumstances of these regions could be accommodated within the GST framework.

4. Integrated GST (IGST):

The Amendment provided for the levy of an Integrated Goods and Services Tax (IGST) on inter-state transactions of goods and services, collected by the central government. This was crucial for maintaining a seamless national market, ensuring that tax is collected at the point of consumption rather than production.

Judicial Scrutiny and Validation

The constitutional validity of GST has been upheld by the judiciary in various rulings. Courts have recognized the legislative competence of both the Parliament and state legislatures to enact laws on GST, affirming the collaborative federal structure envisioned by the GST regime. The Supreme Court of India, in particular, has observed that GST represents an effort to make India a common market with a uniform tax rate, thereby enhancing the efficiency of the tax system and contributing to economic growth.