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Goods and service tax one step closer to final approval
September, 12th 2012

The Goods and Service Tax (GST) Bill is nearing final approval after the Attorney General of India, Goolam E Vahanvati, answered the constitutional queries raised by former finance minister Yashwant Sinha in his capacity as the Chairman of the Parliamentary Standing Committee on Finance.

The value-added tax, expected to be implemented by 2013 once the Committee has handed over its report, will replace all indirect taxes levied on goods and services, and is expected to integrate state economies and boost growth.

While examining the bill, which is also a Constitutional Amendment Bill, Mr Sinha asked whether or not Parliament and State Legislative Assemblies have the option to not approve the proposal mooted by the Finance Minister of India who presides over the GST Council, which arrived at certain conclusions and tabled its proposals in Parliament. And if Parliament has the option to not approve, then the entire Council unravels. Mr Sinha also asked for clarifications on the role of State Legislative Assemblies in this case.

The Department of Revenue studied the queries and asked the Attorney General for his opinion.

In his response, the Attorney General said it is certainly open to Parliament to approve any recommendations but it does not mean the Councils recommendations will have no value. The Council will make recommendations, but the ultimate prerogative lies with Parliament and Legislative Assemblies. The setting up of the Council does not adversely affect the root of the legislative powers over finance, which are sacrosanct, he added.

Mr Sinha had also raised a question on the dispute settlement authority being set up under the council, saying, Not a single rupee can be spent without the approval of Parliament or the State Legislature. This is the constitutional position. In this particular case, you are setting (up) a joint mechanism between (the) Centre and the states through the GST Council and the dispute resolution will be through a dispute settlement authority.

If there is a difference of opinion or a state is doing something which is not in consonance with that, and strikes at the root of the GST, then you have the DSA (dispute settlement authority) which will decide. The state legislature and Parliament have no joint body. So if the state and the Centre come to a conclusion, then Parliament and the state legislatures will be mute spectators, he added.

To this, the Attorney General said this situation will never arise as Legislative Assemblies will always have the ultimate control over finance.

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