The 101 constitutional amendment act (The Constitution Act, 2016), introduced a national Goods and Services Tax (GST) in India on 1 July 2017. It was introduced as the One Hundred and Twenty-Second Amendment Bill of the Constitution of India.

The Goods and Services Tax (GST) is a Value-added tax (VAT) proposed to be a comprehensive indirect tax levy on the manufacture, sale, and consumption of goods and services at the national level. It replaces all indirect taxes levied on goods and services by the Indian Central and state governments. It is aimed at being comprehensive for most goods and services.

The 101 constitutional amendment act is a topic relevant to the UPSC CSE context under General Studies Paper II. It is a basic topic for aspirants to understand the dynamic aspect of the 101 constitutional amendment act. The 101 constitutional amendment act is an important topic for UPSC Civil Services because it highlights the constitutional issues and their impact on Indian society, which are frequently discussed in the exam. Join UPSC Coaching today to boost your preparation. 

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What Is The 101st Constitutional Amendment Act?

The 101st Constitutional Amendment Act of 2016 impacts a watershed moment in India's taxation history, presenting the Goods and Services Tax (GST) regime. The 101st Amendment Act of 2016 allows both the center and states to levy the Goods and Services Tax (GST). Before the 2016 amendment, taxation powers were divided between the center and states. For example, while the center exclusively taxed services, the states exclusively taxed goods at the time of sale. The 2016 amendment replaces various central and state taxes such as excise duty, service tax, sales tax, entry tax, and entertainment tax with GST. While most goods and services will be covered under GST, alcohol for human consumption will remain outside its purview. Petroleum products are initially outside its purview but may be brought under GST if the GST Council decides to do so.

The Vajpayee administration set up an empowered union committee to streamline the GST model to be adopted and to develop the required back-end infrastructure that would be needed for its implementation.

• In his budget speech on 28 February 2006, P. Chidambaram, the Finance Minister, announced the target date for implementation of GST to be 1 April 2010 and formed another empowered committee of State Finance Ministers to design the road map.
• The committee submitted its report to the government in April 2008 and released its First Discussion Paper on GST in India in 2009. 
• Since the proposal involved reform/ restructuring of not only indirect taxes levied by the Central but also the States, the responsibility of preparing a Design and Road Map for the implementation of GST was assigned to the Empowered Committee of State Finance Ministers (EC).
• In April 2008, the EC submitted a report titled "A Model and Road Map for Goods and Services Tax (GST) in India," containing broad recommendations about the structure and design of GST.
• In response to the report, the Department of Revenue made some suggestions to be incorporated into the design and structure of the proposed GST bill.
• Based on inputs from GoI and States, The EC released its First Discussion Paper on Goods and Services Tax in India on 10 November 2009 with the objective of generating a debate and obtaining inputs from all stakeholders.

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Modified Key Constitutional Provisions

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Legislative history

The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014 was introduced in the Lok Sabha by Finance Minister Arun Jaitley on 19 December 2014 and passed by the House on 6 May 2015. In the Rajya Sabha, the bill was referred to a Select Committee on 14 May 2015. The Select Committee of the Rajya Sabha submitted its report on the bill on 22 July 2015. The Rajya Sabha passed the bill on 3 August 2016, and the Lok Sabha passed the amended bill on 8 August 2016. The bill, after ratification by the States, received assent from President Pranab Mukherjee on 8 September 2016. On 29 March 2017, CGST, IGST, UTGST, and SGST compensation laws were passed in Loksabha.

Ratification

The 101st Constitutional Amendment Act was passed in accordance with the provisions of Article 368 of the Constitution and has been ratified by more than half of the State Legislatures, as required under Clause (2) of the said article. On 12 August 2016, Assam became the first state to ratify the bill when the Assam Legislative Assembly unanimously approved it. State Legislatures that ratified the amendment are listed below:

1. Assam (12 August 2016)
2. Bihar (16 August 2016)
3. Jharkhand (17 August 2016)
4. Chhattisgarh (22 August 2016)
5. Himachal Pradesh (22 August 2016)
6. Gujarat (23 August 2016)
7. Delhi (24 August 2016)
8. Madhya Pradesh (24 August 2016)
9. Nagaland (26 August 2016)
10. Haryana (29 August 2016)
11. Maharashtra (29 August 2016)
12. Mizoram (30 August 2016)
13. Sikkim (30 August 2016)
14. Telangana (30 August 2016)
15. Goa (31 August 2016).

The amendment was subsequently ratified by:

1. Odisha (1 September 2016)
2. Puducherry (2 September 2016)
3. Rajasthan (2 September 2016)
4. Andhra Pradesh (8 September 2016)
5. Arunachal Pradesh (8 September 2016)
6. Meghalaya (9 September 2016)
7. Punjab (12 September 2016)
8. Tripura (26 September 2016)
9. Uttarakhand (2 May 2017)
10. Uttar Pradesh (16 May 2017)
11. Tamil Nadu (19 June 2017)
12. West Bengal (8 August 2017)
13. Karnataka (16 June 2017)
14. Kerala (21 June 2017)
15. Manipur (5 June 2017)
16. Jammu and Kashmir (5 July 2017)

Significance of the 101st Constitutional Amendment Act

The Empowered Committee of State Finance Ministers (EC) has proposed a dual GST module for the country. The center has accepted this dual GST model. Under this model, GST has two components, viz., the Central GST to be levied and collected by the center and the State GST to be levied and collected by the respective States. Central Excise duty, additional excise duty, Service Tax, additional duty of customs (equivalent to excise), State VAT, entertainment tax, taxes on lotteries, betting and gambling, and entry tax (not levied by local bodies) would be subsumed within GST. Other taxes that will be subsumed with GST are Octroi, entry tax, and luxury tax, thus making it a single indirect tax in India.

• One Nation, One Tax System: It presented a harmonized taxation system that desired to avoid the cascading impact of taxes, a general problem under the earlier VAT system. This modification led to the integration of several central and state taxes into a single tax regime.
• Easy Tax Filing Process: The taxpayers now had to adhere to a standardized process across the country, a relief particularly for service providers like telecom companies and banks that operated across multiple states and earlier had to comply with different state laws.
• Support for Economic Growth: By simplifying the taxation process, the Act has boosted economic growth. For example, the World Bank noted an improved business environment in India in its subsequent reports after the implementation of GST.
• Enhanced Supply Chain Efficiencies: The unified market facilitated by GST has dramatically improved efficiency by removing bottlenecks at state borders, saving time, and reducing transportation costs, giving marked growth to sectors like logistics and e-commerce.
• Promotion of Digital India: The amendment promoted digital governance through the introduction of the GST Network (GSTN), which digitized the whole tax administration system. The GSTN not only facilitated the easier filing of taxes but also enabled transparency and lessened human discretion, supporting the larger objective of a Digital India.

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Reflecting the Accommodative Spirit of Federalism

Reflecting the accommodative spirit of federalism, the GST framework balances power between the Centre and States. It ensures joint decision-making through the GST Council, promoting cooperative federalism.

• Representation of All States: The GST Council (Article 279A (1) is emblematic of the accommodative spirit of federalism, involving representatives from all states in its composition. It ensures that the distinct and diverse interests of different regions are taken into account while framing policies.
• Way to Settle Conflicts: This way is designed to mediate conflicts between the central and state governments. For example, the resolution of disputes pertaining to compensation to states during the COVID-19 pandemic highlights the system's functionality.
• Revenue Sharing: The consensus-based revenue-sharing agreement under the GST law echoes federal cooperation. States like Tamil Nadu, which were initially apprehensive about potential revenue losses, received a GST compensation of about ₹40,000 crore during the transition period.
• Consensus in Decision-making: The GST Council has promoted consensus in decision-making where states actively engage in collaborative policymaking. For example, the council's decision to reduce tax rates on several essential COVID-19 supplies.
• Strengthening Cooperative Federalism: The GST Council represents the cooperative federalism spirit, where both central and state governments come together to make key policy decisions. For example, the rationalization of tax rates on several items over the years, taking suggestions from different states.

Conclusion

Envisioning a future that leverages the principles of the 101st Constitutional Amendment Act can potentially promote a unified federalism spirit. It is pivotal to address the existing problems to truly harness the helpful possibility of this historical amendment in the legislative framework of India, paving the way for balanced and constructive federal relationships.

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