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The GST Model proposed in the First Discussion Paper produced by the Empowered committee of state finance ministers on Nov 10, 2009, will be dual in nature. It will consist of two components: CGST (Central GST) and SGST (State GST) simultaneously levied by centre and state, respectively, on all transactions of goods and services, except those exempted by law. Both states and centre would independently administer and levy tax on the supply of all goods and services.

Currently in the indirect tax structure, the centre is liable to levy tax on manufacture, rendition of services and import of goods. States are empowered to levy and collect tax on the sale of goods. Centre is authorized to tax services and goods up to production stage only. There are different provisions for levy and collection of tax in our constitution. 7th schedule of article 246 of the constitution of India consists three lists, namely the list I (Union list), list II (state list), and list III (the concurrent list). Different matters are enumerated in these three lists. Parliament has got the powers to make laws with respect to any matter specified in the union list (list I); the legislative of any state has exclusive power to make laws with respect to the matters specified in the state list (list II), while both the parliament and state legislation can pass legislation with respect to items specified in concurrent list (list III).

The relevant entries from all the three lists are as under:

Entry no. 83 (Union list): It states about duties of customs including export duties.

Entry no. 84 (Union list): It states about duties of excise on tobacco and other goods manufactured or produced in India.

Entry no. 92A (Union list): It states about taxes on the sale or purchase of goods other than newspaper, where such sale or purchase takes place in the course of inter-state trade or commerce.

Entry no. 92B (Union list): It states about taxes on consignment of goods where such consignment takes place in the course of inter-state trade or commerce.

Entry no. 92C (Union list): It states about the empowerment of central government to tax services under the Finance Act, 1994.

Entry no. 54 (State list): It states about the empowerment of the state government to charge tax on the sale or purchase of goods other than newspaper except tax on inter-state sale or purchase.

It is obvious that the power to collect revenue is shifted in the favour of centre.

The proposed GST model demands that both centre and state should have an authority to levy tax on goods and services throughout the supply chain. To resolve the present disparity of taxing powers between the centre and states, a constitutional amendment would be required. This amendment will empower the central government to levy tax up to retail stage and the state governments to levy tax on services, respectively. The amendment in the 7th schedule of the constitution would require a special majority of parliament (i.e. 2/3rd majority of the total number of members present and voting, which should not be less than half of the total membership of the house), the ratification of at least half of the state legislatures by special majority and the president assent.


A joint working group (JWG) has already been constituted on September 30, 2009 comprising of the officials of the central and state governments to prepare, in a time bound manner a draft legislation for constitutional amendment, draft legislation for CSGT, a suitable model legislation for SGST and rules and procedures for CGST and SGST. The empowered committee of state finance ministers is likely to meet Mr. Pranab Mukherjee next month to discuss the future course of action on GST (report of March, 10).


Published by

Nagesh Bajaj
Category GST   Report

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