Can government still levy excise on goods After GST Law ?
The modified list provides that excise duty may be levied only on petroleum/petroleum products and tobacco/tobacco products, thereby limiting Central Excise Act’s scope to these specified products.
Has the government lost the power to impose central excise duty on all goods barring petroleum products and tobacco products ? And has it been levying the tax illegally for the last three days?
Big confusion has arisen after the Centre notified certain provisions in the constitution amendment law for goods and services tax (GST) with effect from September 16.
As per notification the government will not levy excise duty on goods other than petroleum products from this date. The notification also binds states to accept GST within a year or they will lose power to tax.
Experts say that situation needs to be corrected as it is obviously not the intent.
ET learnt that senior revenue officials spent the Sunday brainstorming to look into the issue and if it was required to be rectified.
Government officials also claimed a transitional provision provided in the constitution amendment will allow them to continue to collect excise duty on all goods.
“Plain reading of the notification shows that after September 16, central excise is leviable only on petroleum products and tobacco products.. This cannot be the intent.It should to be corrected immediately as it could lead to litigation,” said S D Mazumder, former chairman, Central Board of Excise and Customs.
The Constitution (122nd Amendment) (GST) Act, 2014, passed by Parliament last month to roll out GST, has made changes in Entry 84 of List 1 or the Union List of the 7th Schedule of the Constitution.
Essentially, the amended list provides that excise duty can be levied only on petroleum and petroleum products and tobacco and tobacco products, thereby limiting Central Excise Act’s scope to these specified products.
This provision should klick in when GST is rolled out. However, the government has notified this section from 16.09.2016 itself, when the GST is not in force.
The substance of this notification is that the government has surrendered the power to levy excise duty except in the case of the goods mentioned, experts said.
The problem has arisen as the centre in hurry to carry on with the GST work notified all the provisions of the constitution amendment, including this one that would not allow states to collect taxes after an year making it incumbent upon them to implement GST from next year.
Technically speaking, the excise duty collected on goods in the last three days is not sanctioned by the law.
“This (that Centre will have no right to impose excise duty, service tax, etc. till the implementation of GST) is obviously not the intention of the government and needs to be rectified,” said Pratik Jain, partner at PwC India. “There is a view that entry 97 of Union List empowers the central government to impose these taxes in the interim, but this does not appear to be free from doubt,” he said.
As per expert opinions it is to amend the notification “retrospectively”, which will be open to legal challenges, a situation that government may want to avoid.
Officials ET spoke to, however, cited a transitional provision provided in Section 19 of the Constitution amendment, saying that will allow them to continue to collect excise duty on all goods.
This provision says: “Notwithstanding anything in this Act, any provision of the law relating to tax on GST in force in any state immediately before the commencement of this Act, which is inconsistent with the provisions of the Constitution as amended by this Act shall continue to be in force until amended or repealed by a competent legislature or other competent authority or until expiration of one year from such commencement, whichever is earlier.”
But, this provision in the amendment also has issues.
However, said this provision does not explicitly say if this relates to tax levied by centre or state and also skips mention of Parliament.
Even if the wording ‘competent legislature’ is taken to mean ‘Parliament’ and ‘tax on goods and services’ to include all central taxes, the provision only pertains to taxation in states and does not include union territories. Even if states is construed to mean UTs, it would not include those without legislatures.
This would require an corrective amendment as clause it self would have to be amended.