GST(Goods and Services Tax) is an indirect tax levied on the event of supply of goods and services. However, the constitution does not contemplate one tax on all supplies.
Types of GST:
There are three GST taxes which are applicable to different kinds of supplies. The constitution divides these three taxes amongst the Central and State Governments through an elaborate system which is an amalgam of the GST model prevalent in Canada and the Sales Tax regime in India:
- CGST (Central Goods and Services Tax) by the Central Government;
- IGST (Integrated Goods and Services Tax) by the Central Government;
- SGST (State Goods and Services Tax) by the appropriate State Government on supplies within its territory;
The Union territories levy UTGST, which is a tax similar in nature and function to SGST.
The Central Government as well as the State Government parallelly and separately levy their own GSTs. This was a necessary compromise. GST in India replaces a range of important State indirect taxes.
Support from the States for required amendments to the Constitution would have been dim, if the States were denied full control over their own GST.
While Parliament has passed the Central Goods and Services Tax Act, 2017 for levying CGST, the Integrated Goods and Services Tax Act, 2017 for levying IGST and the Union Territory Goods and Services Tax Act, 2017 for levying UTGST, the State Legislatures have passed their own SGST laws. More than thirty GST statutes are in force in various parts of India as of today.
A GST Council has been created by the Constitution for overseeing the national and state-level implementation of the GST law. The Central Government and all the State Governments are represented on this Council.
The Council and the Governments at the Central and State level have held out a broad promise that the many GST(Goods and Services Tax) laws will be uniform throughout the nation and that no amendment will be introduced without the GST Council’s recommendations.
Now, the GST Council may have a high voice, but it does not have any teeth. Neither Parliament, nor the State Legislatures, are bound to follow the recommendations of the Council.
A State legislature can completely change the system of taxation and convert its GST law into a single point tax, and there is nothing in the Constitution to stop it. As such, uniformity in the GST law is a matter of Centre-State relations and the prevalence of prudence in all parts of the country at any given point of time.
The States can tax a local supply, with exclusive powers reserved to Parliament to determine what is, and what is not,a local supply.