Rajya Sabha Clears Bills to Amend GST Acts for Cess on Demerit Goods
Parliament passes amendments to CGST and IGST Acts, clarifying GST compensation cess on pan masala and tobacco, aligning with a Supreme Court ruling.
Photo by Kunal Saha
Quick Revision
Rajya Sabha cleared CGST (Amendment) Bill, 2023 and IGST (Amendment) Bill, 2023
Bills amend CGST Act, 2017 and IGST Act, 2017
Clarifies GST levy on pan masala, tobacco, and similar items
Specifies maximum rate of GST compensation cess
Aligns with Supreme Court's Mohit Minerals case ruling
Key Dates
Visual Insights
Legislative Journey of GST Amendment Bills
This flowchart illustrates the key stages a bill undergoes to become an Act in the Indian Parliament, specifically highlighting the process through which the Rajya Sabha cleared the recent GST Amendment Bills.
- 1.Introduction of Bill (e.g., in Lok Sabha or Rajya Sabha)
- 2.First Reading (Introduction, publication in Gazette)
- 3.Second Reading (Stage of general discussion, committee stage, clause-by-clause consideration)
- 4.Third Reading (Voting on the Bill as a whole)
- 5.Bill Passed by First House (e.g., Lok Sabha)
- 6.Transmission to Second House (e.g., Rajya Sabha)
- 7.Second House (Rajya Sabha) Process (Similar readings, can pass, reject, or suggest amendments)
- 8.Bill Cleared by Rajya Sabha (as per news)
- 9.Presidential Assent (Bill becomes an Act)
Exam Angles
Fiscal Federalism and Centre-State financial relations under GST.
Constitutional provisions related to GST (Article 279A, 101st CAA).
Role and powers of the GST Council and its recommendations.
Judicial review and interpretation of tax laws (Mohit Minerals case).
Types of taxes: Cess vs. Tax vs. Surcharge.
Parliamentary procedure for financial bills and amendments.
View Detailed Summary
Summary
The Rajya Sabha recently cleared the Central Goods and Services Tax (Amendment) Bill, 2023, and the Integrated Goods and Services Tax (Amendment) Bill, 2023. These bills are crucial because they amend the existing CGST Act, 2017, and IGST Act, 2017, to bring more clarity to how GST is levied on specific items like pan masala, tobacco, and similar products. Essentially, the amendments specify the maximum rate of GST compensation cess that can be imposed on these goods.
This move is significant as it aligns the legislative framework with the Supreme Court's ruling in the Mohit Minerals case, which had implications for the GST Council's recommendations and the levy of cess. It's all about ensuring legal clarity and proper taxation for these particular items.
Background
Latest Developments
Practice Questions (MCQs)
1. Consider the following statements regarding the recent amendments to GST Acts and related provisions: 1. The Central Goods and Services Tax (Amendment) Bill, 2023, primarily aims to clarify the levy of GST compensation cess on 'demerit goods'. 2. The Supreme Court's ruling in the Mohit Minerals case held that the recommendations of the GST Council are binding on both the Union and State governments. 3. GST compensation cess was originally levied to compensate states for revenue loss arising from the implementation of GST for a period of five years from its inception. Which of the statements given above is/are correct?
- A.1 only
- B.1 and 3 only
- C.2 and 3 only
- D.1, 2 and 3
Show Answer
Answer: B
Statement 1 is correct. The news explicitly states that the bills aim to bring clarity to how GST is levied on specific items like pan masala, tobacco, and similar products, specifying the maximum rate of GST compensation cess. Statement 2 is incorrect. The Supreme Court in the Mohit Minerals case clarified that the recommendations of the GST Council are not binding on the Union and State legislatures, but have a persuasive value. This ruling underscored the legislative autonomy of both the Parliament and State Assemblies. Statement 3 is correct. The GST (Compensation to States) Act, 2017, provided for compensation to states for loss of revenue arising on account of implementation of the goods and services tax for a period of five years from the date of its implementation (July 1, 2017).
2. With reference to the Goods and Services Tax (GST) Council, consider the following statements: 1. The Union Finance Minister is the Chairperson of the GST Council, and decisions are taken by a three-fourths majority of the weighted votes of the members present and voting. 2. The Union Government has a one-third weightage of the total votes cast, while all the State Governments together have a two-thirds weightage. 3. The GST Council is a constitutional body established under Article 279A of the Indian Constitution. Which of the statements given above is/are correct?
- A.1 and 2 only
- B.2 and 3 only
- C.1 and 3 only
- D.1, 2 and 3
Show Answer
Answer: D
All three statements are correct. Statement 1: Article 279A(3) specifies that the Union Finance Minister is the Chairperson of the GST Council. Article 279A(9) states that every decision of the GST Council shall be taken by a majority of not less than three-fourths of the weighted votes of the members present and voting. Statement 2: Article 279A(9) also specifies that the vote of the Central Government shall have a weightage of one-third of the total votes cast, and the votes of all the State Governments taken together shall have a weightage of two-thirds of the total votes cast. Statement 3: The GST Council was constituted by the President of India on 15th September 2016, as per Article 279A of the Constitution, inserted by the 101st Constitutional Amendment Act, 2016.
3. In the context of public finance in India, which of the following statements best describes the primary distinction between a 'cess' and a 'tax'?
- A.A cess is levied only by the Central Government, while a tax can be levied by both Central and State Governments.
- B.A cess is always temporary, whereas a tax is permanent.
- C.The proceeds of a cess are earmarked for a specific purpose, unlike a tax which goes into the Consolidated Fund of India for general expenditure.
- D.A cess is subject to parliamentary approval, but a tax can be imposed by executive order.
Show Answer
Answer: C
Statement C correctly identifies the primary distinction. A cess is a tax levied for a specific purpose, and its proceeds are earmarked for that particular purpose. For example, the GST Compensation Cess is specifically for compensating states. Once the purpose is met, the cess can be discontinued. In contrast, the proceeds of general taxes (like income tax, corporate tax, or GST) go into the Consolidated Fund of India and are used for general government expenditure, without being tied to a specific project or service. Statement A is incorrect; states can also levy cesses (e.g., some states levy education cess). Statement B is incorrect; while many cesses are temporary, some can be long-standing, and not all taxes are permanent in their exact form. Statement D is incorrect; both cesses and taxes require legislative approval (Parliamentary or State Assembly) for their imposition.