The government may not propose a new Fourth List in the Constitution to deal with the much-anticipated Goods and Services Tax (GST). Instead, GST, which will empower both the Centre and the states to simultaneously levy taxes on goods and services, may be defined under an Article in Chapter 11.
The Union law ministry, which is working on the Constitutional Amendment Bill, can either change the existing Article 246, which empowers the three lists, or it can introduce a new article. “In Constitution, list means a list of entries. Technically, it may not be called a list because the Article empowering GST may not list out the entries as it is there in case of Union List, State List and the Concurrent List,” a finance ministry told Business Standard on condition of anonymity.
Another official confirmed the Constitution may just have a few sentences empowering both the Centre and the state to levy tax on all goods and services, except a few items which would be mentioned there.
The text on GST may read, “The Centre and the states will have the authority to levy and collect GST on all goods and services, except the following...” Under this, the goods and services which will be kept out of GST will be mentioned, for example, petroleum. For bringing the items mentioned here under GST in the future, the government will have to amend the Constitution.
The tax rate and thegoods and services which will attract GST will be listed in the GST legislation. The exemption list in the GST Bill will contain items under GST but exempted from duty. This would give the government flexibility to levy tax on such goods and services whenever required in the future. Entries under GST may be removed from the Union and the State List to avoid duplication.
The finance ministry had also suggested another option, of facilitating a tax agreement between the Centre and the states by re-enacting Article 278, which had allowed princely states to enter into an agreement with the Union with regard to levy and collection of a Central tax within the state.
This was based on the recommendation of the Thirteen Finance Commission. It is, however, learnt that the law ministry has not moved ahead with the idea because there is a view within the government that this option will not work, as the agreement under the said Article was for a limited period.
More From This Section
This is for the first time since the Constitution was enacted that a tax base is proposed to be shared between the Centre and the states. In the Concurrent List both the Centre and the states can have legislation on an item such as the stamp duty, but the tax rate is decided under their respective lists. For example, the stamp duty on debentures and bonds is decided by the Centre, but on everything else not mentioned in the Union List, such as land, it is decided by the states.
The Constitutional amendment draft is expected to be sent back to the finance ministry shortly, after which it will be shared with the empowered committee.