GST amendments via Finance Bill: A cheeky run by Modi government

Topics Finance Bill | Money Bill | GST

Representative imageGST Council was constituted in terms of Article 279A
Finance Minister Nirmala Sitharaman in her maiden Budget speech has sought to implement the recommendations made by the GST Council during its 35th meeting last month. The Finance (No. 2) Bill, 2019 (Bill No. 55 of 2019), seeks to amend, among others, the provisions of the Central GST Act, 2017, Integrated GST Act, 2017 and the Union Territory GST Act, 2017.

While there may be nothing wrong with the proposed move, but one may have to bear in mind that such an amendment is routed through the Finance Bill. At this juncture, it would be prudent to understand the meaning of ‘Finance Bill’. 

The Finance Bill, which is introduced in the Lok Sabha every year to undertake the proposals made by the government, contains matters relating to the revenue and the expenditure of a country. The proposals for levy of new taxes and modification or continuance of the existing tax structure beyond the approved period are submitted to Parliament through this Bill. Hence, it may be seen that the Bill is introduced as a ‘Money Bill’ within the realms of Article 110 of the Constitution.    

It may be noted that a Money Bill cannot be introduced in the Council of States, i.e. the Rajya Sabha. Once the Lok Sabha, i.e. House of People, passes the Money Bill, it is sent to the Upper House for its recommendations. The Rajya Sabha, however, can neither reject nor amend the Bill and must return it within 14 days. Once the Bill is sent back, the Lok Sabha may choose to accept or reject all or any of the said recommendations. 

Moreover, Article 110(2) provides that a Bill would not be a Money Bill merely by reason that it provides for imposition of fines or penalties or payment of fees for licenses or for services or by reason that it provides for imposition, abolition, remission, alteration or regulation of any tax by a local authority. Hence, where a question arises as to whether a Bill is a Money Bill or not, the power has been conferred upon the Speaker of the House of People to give a final decision. 

For the purpose of introducing GST in the country, the 122nd Constitutional Amendment Bill, 2016, was passed by both Houses of Parliament and then ratified by 50 per cent of the state legislatures. The Bill then received the Presidential assent and same was notified as the 101st Constitution Amendment Act, 2016. This was in accordance with Article 368 of the Constitution that mandates ratification by half of the state assemblies for cases listed under clause (2). These cases include amendment to provisions of Article 54, Article 55, Article 73, Article 162, Article 241 or Article 279A or any provisions mentioned in Chapter IV of Part V, Chapter V of Part VI, or the provisions listed in Chapter I of Part XI, or any provisions mentioned in the lists mentioned in the Seventh Schedule of the Constitution. 

Consequently, the GST Council was constituted in terms of Article 279A, and vested with powers to make recommendations to the Union and states on important issues related to GST. 

In its 28th meeting held in July 2018, the GST Council had recommended the first-ever revision to the GST legislation and these changes were proposed by way of GST Amendment Bills of 2018. The four Bills were passed by Par­lia­ment on August 24, 2018.

Subsequently, these amendments we­re implemented throu­gh notifications. 

However, with the introduction of Finan­ce (No. 2) Bill, 2019, it seems that for the first time since the advent of the new indirect tax regime, the government has sought to bring in amendments to GST legislation through the Finance Bill. This poses certain questions as to whether the government can amend the GST law by including the proposals in Finance Bill. Would this be a trend of the Modi Government 2.0 to introduce amendments to GST legislation during the Union Budget, subject to the GST Council recommendations? And above all, can the government propose any amendment in the Bill which goes beyond the recommendations of the GST Council? 

Considering that GST is a ‘tax’ covered by Article 110(1) of the Constitution, the government seems well within its ambit to amend the law through the Finance Bill, which is also a Money Bill. As regards the last question, looking at the mandate of Article 279A of the Constitution, a detailed analysis of the fine print would tell that the government has gotten away with a cheeky run! 
Dosh is executive director and Nadkarni is manager at SKP Business Consulting. 
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