The most important fundamental step for the introduction of GST is 122nd Constitutional Amendment Bill (CAB) which had been taken up on the year 2015 to propose GST in Lok Sabha. The rationale for this bill is to parallelize the levy of indirect taxes by the centre and state which was actually the pre-requisite for launching GST. The key facets of CAB will be discussed in the following paragraphs:

CAB – enables the GST:

CAB only enables the introduction of GST for both centre and state to levy the taxes for the supply of goods or services or both. Thus in GST legal regime, there will be one SGST and one CGST including union territories.

Services defined:

It may be recalled that the 115th CAB did not provide any definition for the term “Service”, whereas in 122nd CAB, it specially provides that services means anything other than the goods. The definition of the term service will altogether remove the disputes in all the aspects that whether something is goods or services unless the government proposes different tax rates for the services and the goods.

Inter-state sale of goods to attract additional tax:

CAB provides that an additional tax of 1% will be levied by the centre for inter-supply of goods not on services. The additional tax will be levied on state where the goods actually originated. This additional tax seems to be a new version of CST. This tax duration is up to 2 years, further it can be extended by GST council. CAB is silent on the aspect that whether the credits of the additional levy will be available or a cost in the supply chain. If it will be a cost, then the tax cascading might continue in the GST regime too.

Import of Goods and Services:

Based on the current system, the import attracts the Basic Custom Duty (BCD), Additional Custom Duty (ACD) and the Special Additional Custom Duty (SACD). When regarding services, it attracts service tax or the R&D in special instances. CAB provides that the import of goods or services will be considered as supply of goods or services or both in the course we can refer it as inter-state trade or commerce and thus it will attract IGST i.e. (CGST and SGST). The import of goods may attract IGST. The import of services attracts IGST in the GST regime which is against the service tax at present.

Exception products:

Alcohol, a human consumption is excluded in GST regime. It clearly stated that apart from alcohol other goods are intended to include in the GST. This exclusion shows that the companies which are manufacturing the alcohol cannot avail the credit of the GST paid by them during the procurement. Petroleum and tobacco products have to continue with their duty of excise. Petroleum products cannot attract GST, in the latter stage it may be levied by the GST council.

GST council (Roles):

• How the model of the GST would be?
• Which surcharges, cesses and taxes can be subsumed in the GST?
• Which goods or services can be exempt or subject to GST?
• What would be the threshold limit of GST?
• What may be the rate of GST including floor rates?

CAB provides that the GST council will be formulated. The council consists of Union Finance Minister, Union Minister of State, and State Finance Minister. GST council has the ultimate power to make the recommendation to centre and states. In the 115th CAB, it is provided that it has an authority to settle the disputes between the centre and the states with regards to GST. Furthermore, in this CAB, it has an authority to determine the modalities in order to resolve the disputes which arises out of the recommendation.

Compensation to States:

In this CAB, it provides the recommendation to the GST council to compensate the states if in case the loss of revenue arises when roll out the implementation of GST for up-to 5 years. The centre seems to address the concerns which have been raised by the state regarding the fear of loss of revenue.