STATEMENT OF OBJECTS AND REASONS
Presently, article 269 of the Constitution empowers the Parliament to make law on the taxes to be levied on the sale or purchase taking place in the course of inter-State trade or commerce. Accordingly, Parliament had enacted the Central Sales Tax Act, 1956 for levy of central sales tax on the sale taking place in the course of inter-State trade or commerce. The central sales tax is being collected and retained by the exporting States.
2. The crucial aspect of central sales tax is that it is non-vatable, i.e. the credit of this tax is not available as set-off for the future tax liability to be discharged by the purchaser. It directly gets added to the cost of the goods purchased and becomes part of the cost of business and thereby has a direct impact on the increase in the cost of production of a particular product. Further, the fact that the rate of central sales tax is different from the value added tax being levied on the intra-State sale creates a tax arbitrage which is exploited by unscrupulous elements.
3. In view of the above, it has become necessary to have a Central legislation, namely, the Integrated Goods and Services Tax Bill, 2017. The proposed Legislation will confer power upon the Central Government for levying goods and services tax on the supply of goods or services or both which takes place in the course of inter-State
trade or commerce. The proposed Legislation will remove both the lacunas of the present central sales tax. Besides being vatable, the rate of tax for the integrated goods and services tax is proposed to be more or less equal to the sum total of the central goods and services tax and state goods and services tax or Union territory goods and services tax to be levied on intra-State supplies. It is expected to reduce cost of production and inflation in the economy, thereby making the Indian trade and industry more competitive, domestically as well as internationally. It is also expected that introduction of the integrated goods and services tax will foster a common or seamless Indian market and contribute significantly to the growth of the economy.
4. The Integrated Goods and Services Tax Bill, 2017, inter alia, provides for the following, namely :—
(a) to levy tax on all inter-State supplies of goods or services or both except supply of alcoholic liquor for human consumption at a rate to be notified, not exceeding forty per cent. as recommended by the Goods and Services Tax Council (the Council);
(b) to provide for levy of tax on goods imported into India in accordance with the provisions of the Customs Tariff Act, 1975 read with the provisions contained in the Customs Act, 1962;
(c) to provide for levy of tax on import of services on reverse charge basis under the proposed Legislation;
(d) to empower the Central Government to grant exemptions, by notification or by special order, on the recommendations of the Council;
(e) to provide for determination of the nature of supply as to whether it is an inter-State or an intra-State supply;
(f) to provide elaborate provisions for determining the place of supply in relation to goods or services or both;
(g) to provide for payment of tax by a supplier of online information and database access or retrieval services;
(h) to provide for refund of tax paid on supply of goods to tourist leaving India;
(i) to provide for apportionment of tax and settlement of funds and for transfer of input tax credit between the Central Government, State Government and Union territory;
(j) to provide for application of certain provisions of the Central Goods and Services Tax Act, 2017, inter alia, relating to definitions, time and value of supply, input tax credit, registration, returns other than late fee, payment of tax, assessment, refunds, audit, inspection, search, seizure and arrest, demands and recovery, appeals and revision, offences and penalties and transitional provisions, in the proposed Legislation; and
(k) to provide for transitional transactions in relation to import of services made on or after the appointed day.
5. The Notes on clauses explain in detail the various provisions contained in the Integrated Goods and Services Tax Bill, 2017.
6. The Bill seeks to achieve the above objectives.
NEW DELHI; ARUN JAITLEY.
The 23rd March, 2017.