Union Government introduced Constitution (122nd Amendment) Bill to facilitate introduction of GST

Union Government introduced the Constitution (122nd Amendment) Bill, 2014 in the Lok Sabha on 19 December 2014 to facilitate the introduction of the GST regime in India.

Created On: Dec 20, 2014 11:38 ISTModified On: Dec 20, 2014 12:38 IST

Union Government introduced the Constitution (122nd Amendment) Bill, 2014 in the Lok Sabha on 19 December 2014. The introduction of this Bill will facilitate the introduction of the Goods and Services Tax (GST) regime in India.

The 122nd Constitution Amendment Bill seeks to inserts Article 246A, 269A, Article 279A and omits Article 268A which was inserted by the Constitution (88th Amendment) Act, 2003. It also omits Entry 92 and 92C from the Union List and Entry 52 and 55 of the State List of the Seventh Schedule

Besides, it amends Article 248, 249, 250, 268, 269, 270, 271, 286, 366, 368, Sixth Schedule and the Entry 84 of the Union List and Entry 54 and 62 of the State List of Seventh Schedule of the Constitution.

Article 246A: Empowers Legislature of every State to make laws with respect to goods and services tax imposed by the Union or by such State provided that these powers are subject to laws made by Parliament in accordance with the Article 246A (2).

Article 246A (2): Parliament has the exclusive power to make laws with respect to GST where the supply of goods, or of services, or both take place in the course of Inter-State trade or commerce.

Article 269A: Provides that GST on supplies of the good and services taking place in the coruse of inter-state trade will be levied and collected by the Union and apportioned between the Union and the States in the manner provided by the Parliament by law on the recommendations of the GST Council.

Article 279A: Empowers President of India to constitute a Goods and Service Tax (GST) Council within sixty-days of the commencement of the 122nd Constitution Amendment Act.

Main Provision of the Bill

  • It provides for constitution of a Goods and Services Tax (GST) Council to recommend to the Union and States on the inclusion and exclusion of goods and services
  • It brings petroleum crude, high speed diesel, motor spirit, natural gas, aviation turbine fuel and tobacco and tobacco products within the purview of Union List and State list.
  • It proposes an additional tax on supply of goods, not exceeding one percent, in the course of inter-State trade will be levied and collected by the Union for a period of two years and apportioned to the States
  • The net proceeds of additional tax on supply of goods, except the proceeds from Union Territories, will not form the part of Consolidated Fund of India and shall be deemed to have been apportioned to States from where the supply originates.
  • It proposes that Parliament by Law on the recommendation of the GST Council provide for the compensation to the States for loss of revenue arising on account of implementation of GST for a period of five years.
  • It subsumes all the Central indirect taxes, levies and Central Sales Tax and State Value Added Tax and Sales Tax
  • It dispenses with the concept of declared goods of special importance under the Constitution
  • It covers all goods and services except alcoholic liquor for human consumption for the levy of GST.
  • In case of petroleum products, these goods will not be subjected to GST till a date is notified on the recommendation of the GST Council

About Goods and Services Tax (GST) Council

1.The GST Council comprises of following members

  • Union Finance Minister: Chairperson
  • Union Minister of State in charge of Revenue or Finance: Member
  • Minister in charge of Finance ot Taxation or any other Minister nominated by each State government: Members

2.The GST Council should choose one amongst them to be the Vice-Chairperson of the Council for such period as they may decide.

3.Functions of GST Council

  • To make recommendations to Union and State on the taxes, cesses and surcharges levied by Union, State or local bodies that can be subsumed in the GST
  • To make recommendations on goods and services that may be subjected to, or exempted from the GST
  • To propose a model GST Laws, principles of levy, apportionment of Integrated GST and the principles that govern the place of supply
  • Recommend the threshold limit of turnover below which goods and services amy be exempted from GST
  • Recommend the rate including floor rates with bands of GST
  • Recommend any special rate or rates for a specified period to raise additional resources during any natural calamity or disaster
  • Recommend special provisions with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand

4.Every decision of the Council shall be taken by a majority of not less than three-fourth of the weighted votes of the members present and voting in accordance with the following principles:

(a) The vote of the Union government shall have a weightage of one-third of the total votes cast

(b) The votes of all the States government taken together shall have  a weightage of two-third of the total votes cast in the meeting

5. One half of the total number of members of the GST Council shall constitute the quorum at its meeting


The tabling of the GST Bill in the Lok Sabha is only half-a-step towards implementing the reforms much needed to rejuvenate the economy. The Bill is a result of a series of hectic-negotiations with the empowered committee of state finance ministers which seeks to ensure seamless transfer of goods and services across the country by removing the cascading effect of several state and central levies.

Although Union Finance Minister Arun Jaitley called the Bill as the biggest tax reform since 1947, however, tax experts said the structure of the Bill is riddled with intrinsic conflicts.

According to Harishanker Subramaniam, national leader, indirect tax, Ernst & Young, “the 1 percent additional levy is distortionary. It is for origin or manufacturing states while the GST as such is a destination-based tax. Centre has gone too far to get states on board. It has travelled more than half way to bring them.”

Also, it would be better that Union government now takes the step towards introducing Direct Tax Code Bill. Because implementing these two tax reforms bill will only make the economic reforms a complete one.

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