The Government of India has contemplated to roll out the Goods and Services Tax (GST) with effect from 1 April 2017. Full efforts are being made in this direction. The rate structure for GST has already been decided by the GST Council. Draft Model GST Law, IGST Law and GST Compensation Law have already been put in public domain, which have to be passed by the Parliament. At the time of this writing (3 November 2016) the GST Council is meeting in New Delhi to deliberate and try to resolve the contentious point of dual control of assessees under this new indirect tax regime. However, there are reports in media that after the demonetization of ₹ 1000 and 500 currency notes, many opposition parties are not in a mood to cooperate with the Central Government on GST and its roll out may not now be possible from 1 April 2017. The question is how long can the roll out of GST be delayed and whether there is an outside limit under law beyond which the GST roll out cannot be delayed? Also, whether such last date can be extended further? Let us examine these issues in this article.
Section 1(2) of the Constitution (One Hundred and First Amendment) Act, 2016, by which GST related amendments have been made in the Constitution, lays down the provisions relating to the date of commencement of the amendment as under:
“(2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint, and different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the commencement of that provision.”
Therefore, the date of commencement of a specific provision in the above Constitution Amendment Act is the date which is so appointed in the Official Gazette.
It is pertinent to point out that all provisions of the aforesaid Constitution Amendment Act have now been brought in force. Section 12 of the said Amendment Act was brought into force with effect from 12 September 2016 vide Gazette Notification No. S.O. 2915(E), dated 10 September 2016. All other remaining sections of the said Amendment Act, namely sections 1 to 11 and sections 13 to 20 have also been brought into force with effect from 16 September 2016 vide Gazette Notification No. S.O. 2986(E), dated 16 September 2016.
Now, for the purposes of our present discussion, Section 19 of the said Amendment Act is relevant, which is reproduced below:
“19. Transitional provisions. – Notwithstanding anything in this Act, any provision of any law relating to tax on goods or services or on both in force in any State immediately before the commencement of this Act, which is inconsistent with the provisions of the Constitution as amended by this Act shall continue to be in force until amended or repealed by a competent Legislature or other competent authority or until expiration of one year from such commencement, whichever is earlier.”
Thus, this provision makes it clear that all existing provisions of law relating to tax on goods or services or on both in force in any State shall be valid LATEST up to the expiry of the period of one year from the date of commencement of this Amendment Act. As seen above, Section 1(2) of the Act provides that any reference in any such provision to the “commencement of this Act” shall be construed as a reference to the commencement of that provision. Therefore, for the purposes of Section 19, the date of commencement of the Amendment Act shall be 16 September 2016 since it is on this date that Section 19 was brought into force.
Therefore, the provisions of Section 19 mandate that all existing provisions of law relating to tax on goods or services or on both in force in any State shall be valid LATEST up to 15 September 2017, when one year from commencement gets completed.
Thus, it should be clear that latest by 16 September 2017, the new GST provisions should come into existence, since latest by 15 September 2017 the existing tax provisions which are inconsistent with the provisions of the above Constitution Amendment Act will become invalid and non-existing. Whether this date can be extended further, we shall see slightly later in this article.
As an aside, let me first point out that it is interesting to note that Section 19 talks of laws “in force in any State”. Does it mean that this provision does not apply to the Central tax laws which are inconsistent with the above Constitution Amendment Act relating to GST? If that be so, then that would imply that the Central tax laws such as Central Excise and Service Tax will NOT be protected even till 15 September 2017, and that such Central laws would become invalid immediately on the commencement of the said Act, i.e., on 16 September 2016 itself!!!
Thus, there appears to be a lacuna in Section 19 since it purports to protect only the tax laws “in force in any State”. However, a different interpretation could mean that even the Central tax laws are also “in force in any State” or rather they are in force in “all States”. So, Section 19 may perhaps give protection to the inconsistent Central tax laws also. In addition to this expansive interpretation, there is another way of giving comfort to the Central tax laws. These Central taxes may also be supported by the “residuary legislative powers” of the Centre under Entry 97 of the Union List (i.e., List I) in Seventh Schedule to the Constitution, which is reproduced below:
“97. Any other matter not enumerated in List II or List III including any tax not mentioned in either of those Lists.” [Emphasis supplied by me.]
Thus, any tax not mentioned in the State List or the Concurrent List is within the legislative powers of the Parliament. Therefore, even though Section 13 of the above Constitution Amendment Act has amended the Entry 84 (now limiting Union’s legislative powers with regard to duties of excise only on some specified items such as petroleum and tobacco related goods) and has deleted Entry 92 (Taxes on the sale or purchase of newspapers and on advertisements published therein) and has also deleted Entry 92-C (Taxes on Services), the fact remains that these taxes are not mentioned either in the List II or List III, due to which these taxes can now be covered in Entry 97 which gives residuary powers to the Union.
In view of these reasons, I am of the considered opinion that even though Section 19 of the above Constitution Amendment Act is not happily worded and appears to have a lacuna, it does not make much difference and that the Central tax laws (such as excise duties and service tax) may also perhaps get the protection of Section 19 till 15 September 2017. In fact, since these Central taxes may be covered under Entry 97 of the List I in the Seventh Schedule, these may perhaps be protected even beyond 15 September 2017, since they would not be inconsistent with the provisions of the Constitution. This is what is my personal opinion.
However, for the purposes of the present discussion, for the sake of consistency, I shall presume that all tax laws, whether Central or State, which have been subsumed in the GST would become invalid after 15 September 2017, if we go by the mandate of Section 19 of the said Amendment Act.
But, is it final? Is there a way out to extend this time limit?
Well, in my opinion there are two solutions to this issue.
FIRST SOLUTION: I feel that Section 20 of the aforesaid Constitution Amendment Act may come to rescue in this regard. Let us see what does it say:
“20. Power of President to remove difficulties.- (1) If any difficulty arises in giving effect to the provisions of the Constitution as amended by this Act (including any difficulty in relation to the transition from the provisions of the Constitution as they stood immediately before the date of assent of the President to this Act to the provisions of the Constitution as amended by this Act), the President may, by order, make such provisions, including any adaptation or modification of any provision of the Constitution as amended by this Act or law, as appear to the President to be necessary or expedient for the purpose of removing the difficulty:
Provided that no such order shall be made after the expiry of three years from the date of such assent.
(2) Every order made under sub-section (1) shall, as soon as may be after it is made, be laid before each House of Parliament.”
Thus, it is clear that Section 20 gives power to the President of India (which basically means, the Central Government) to pass any order, make such provisions (including any adaptation or modification of any provision of the Constitution as amended by this Act or law), as appear to the President to be necessary or expedient for the purpose of removing the difficulty, whenever any such difficulty arises in giving effect to the provisions of the Constitution as amended by this Act.
It is pertinent to point out that Section 20 specifically mentions that such “difficulty” includes any difficulty in relation to the transition from the provisions of the Constitution as they stood immediately before the date of assent of the President to this Act to the provisions of the Constitution as amended by this Act. Now, a perusal of Section 19 shows that its heading itself shows that it lays down “Transitional provisions”. Therefore, in my considered opinion, if any difficulty arises due to the mandate of Section 19, which lays down “Transitional provisions”, the President would have the power to remove such difficulty by extending the period of operation of the applicability of the existing tax laws which are supposed to be subsumed in GST even beyond 15 September 2017.
SECOND SOLUTION: Secondly (and this is an obvious solution), I feel that it should also be possible to amend Section 19 itself, of the aforesaid Constitution Amendment Act, in order to extend the period of validity of the existing tax laws beyond 15 September 2017. Of course, this amendment will itself have to be by way of a fresh Constitution Amendment Act, which shall have to be ratified by legislatures of not less that half of the states, as required under the Proviso the Article 368 of the Constitution.
Conclusion: Therefore, while the existing tax laws relating to taxes which are to be subsumed in GST would be valid only till 15 September 2017 and by or before that date the GST will have to rolled out in India, there are methods of bypassing the said date if the need arises, as suggested above.
[Dr. Dhamija is a constitutional expert, having completed his doctorate in constitutional law from Mumbai University in the year 2004.]
