GST Constitutional Amendment Bill passed by Rajya Sabha

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Highlights of discussion in Rajya Sabha (Upper House of Parliament of India) on August 3,
2016, to amend the Constitution of India to introduce the goods and services tax (GST)
The GST Constitution Amendment Bill1
has been passed today by Rajya Sabha with certain
amendments to the original Bill. One of the key amendments is deletion of clause of one percent
additional tax on goods in the course of inter-State trade.
The Bill has been voted unanimously in favour by all those present (203 votes) in the Rajya Sabha
(current strength 243 members). AIADMK (13 members) abstained from voting. There was no vote
against GST.
There being amendments to the Bill earlier, the GST Constitution Bill, as passed by the Rajya Sabha
would now have to be referred back to the Lok Sabha (Lower House of Parliament of India).
Brief of the proceeding in Rajya Sabha:
Introduction of the Bill:
The Union Finance Minister moved the GST Constitution Amendment Bill for consideration and
passing along with certain amendments to the Bill.
He started the discussion laying out the road-map till date to this Bill. He stated that the larger
consensus on the Bill has been built over the period of time. The Bill does not surrender the
sovereignty of the States but it is pooling the sovereignty of the States. GST would provide for one
uniform economic market, enable to check evasion, enlarge the tax base, be equitable to consuming
States and boost growth rates. He also informed that the information technology backbone (Goods
and Service Network) is at reasonable advanced stage.
Finance Minister confirmed that the clause for one percent additional tax on supply goods in the
course of inter-State trade or commerce has been deleted. A mechanism to adjudicate disputes had
been proposed in the Bill. The disputes would be resolved by the GST Council. The rate of tax
would be based on the guiding principles laid down now by the Empowered Committee of State
Finance Ministers.
Key observations of other political parties:
Indian National Congress
Congress never opposed to the idea of GST but opposed the current GST Constitution Amendment
Bill. Congress highlighted the following four issues
- It is now proposed through an amendment to the Bill that the specified amount collected would
not form part of the Consolidated Fund of India. It was highlighted that any amount collected as
tax has to go to Consolidated Fund of India and it cannot remain ‘no-where’.
- One percent additional tax should not have been there, in first place, in a destination based
consumption tax regime. The deletion now is a welcomed.
- The mechanism to adjudicate disputes proposed is already in existence in Article 131 of the
Constitution of India. The proposed amendment is without any reference to Article 131. The
adjudication mechanism suggested earlier in the 2011 Bill was much better mechanism. There
should be a ‘dispute resolution authority’.
- Rate of tax should be laid out and changed only by the Parliament and not by the executive, as in
case of Income Tax. The standard rate of GST should be 18 percent, this rate is based on the
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The Constitution (One Hundred And Twenty-second Amendment) Bill, 2014

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Report on the GST Rate of the Chief Economic Advisor to the Government of India. There can
be a merit rate and a demerit rate. 70 percent of the goods should be covered by the standard rate.
The Congress clearly demanded that the rate of tax should be stated in the GST Law (though not in
the Constitution). Further, Congress demanded assurance that the GST Law would be introduced as
‘Finance Bill’ and not as ‘Money Bill’, so that Rajya Sabha can discuss the GST Law when it is to be
legislated. Congress supported the Bill, but wanted assurances.
Samajwadi Party
SP supported the points raised by Congress. It wanted to know when GST would be introduced.
What would be the basic exemption limit? What will happen to local bodies tax? Can Government
assure that the State would not change GST rate and the GST rate would remain the same by all the
States. SP supported the Bill, but wanted clarifications and assurances.
AIADMK
AIADMK opposed the Bill. The Bill violates the fiscal autonomy and violates Article 21 of the
Constitution of India. Tamil Nadu would incur a permanent loss which is estimated at Rs. 9200
crores. It demanded that petroleum products should be kept out of GST forever.
Communist Party of India (Marxist)
CPI(M) raised the concerns that -
- Fiscal autonomy is encroached upon, India being an ‘union’ of States.
- Tax rate should be ‘fair revenue rate’ and not ‘revenue neutral rate’.
- The amount collected has to go to Consolidated Fund of India and Consolidate Fund of State and
it cannot remain ‘no-where’.
- Dispute resolution mechanism should not be left to GST Council alone; the mechanism should be
laid out in detail.
CPI(M) also stated that the GST Law when introduced should be as ‘Finance Bill’ and not as ‘Money
Bill’.
Biju Janata Dal
BJD supported the Bill. BJD suggested that a non-rebatable cess should be allowed to be levied on
natural resources. Like Union is allowed to levy central excise duty on tobacco and tobacco products,
the States should also be allowed to levy tax other than GST on such goods. States should also have
the authority in the GST Law to audit tax payers of IGST. Weightage of voting of two-third in the
GST Council encroaches on the veto power of the States; the weightage should be increased to three-
fourth.
Response of Union Finance Minister:
Union Finance Minister replied to most of the queries.
Replying on the weightage of veto power in the GST Council, he stated that both, the Union and
States, would retain their sovereignty and a pooled sovereignty would come-in for a uniform taxation
structure. India being a ‘union’ of States, the States cannot be without the ‘Union’. Both the Union
and States would have veto power.

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With respect to the rate of tax, he stated that the rate would be based on the guiding principles laid by
the Empowered Committee of State Finance Ministers – (i) the basis of taxes to be lower and (ii)
collect what is essential of current revenue requirement. The tax should check evasion and avoid
cascading effect. Currently, States do not agree with the Report of the Chief Economic Advisor on
Rate of GST. The rate of tax should be reasonable to the extent possible.
The Finance Minister narrated the reason of ‘may’ becoming ‘shall’ in respect of Clause for
compensation to the States for loss of revenue arising on account of implementation of GST. He also
stated the ‘trust deficit’ of the States in the Union, is the only reason for have a provision for the first
time in the Constitution where Parliament is given direction rather than being requested for.
The classic debate between the two outstanding lawyers was visible - on amendment to the original
Bill on the aspect of collections apportioned to a State not forming part of the Consolidated Fund of
India. The Finance Minister referred to similar provision in Article 268(2) of the Constitution, which
he defended when referred to be a clumsy draft.
The amendment in respect of dispute resolution was made on the recommendation of the
Parliamentary Standing Committee which was accepted by the earlier Finance Ministry in March
2014.
Congress demanded again the assurance that the GST Law should be introduced as ‘Finance Bill’ and
not as ‘Money Bill’, to which the Finance Minister assured that he would follow the provisions in the
Constitution of India, which stands above any such assurance. Being reluctant to give any such
assurance, Finance Minister did state that he would discuss the GST Law with the opposition.
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