Making GST work for India Inc

Litigation may stonewall economic reforms’

Businesses have only 240 days to realign their systems and processes in line with the new indirect tax regime in the country. Experts share their views on the steps that will help them become GST- ready

An important objective of the proposed Goods and Services Tax ( GST) is to ensure a uniform tax base, same or similar tax rates, and aharmonised tax regime in India, which would unify India into a single market. However, under the Indian federal system, such need for harmonisation is often in conflict with the principles of fiscal autonomy enshrined in the Constitution.

To achieve a balance between these competing principles, the Constitution ( 122nd Amendment) Bill, 2014, ( GST Bill) proposes setting up of a GST Council, comprising the finance minister ( FM), minister of state in charge of revenue, and state FMs. Among other things, the Council would make suggestions on important issues such as tax base, tax rates, exemptions and model legislations.

In the Indian political scenario, the recommendation made by the Council may lead to inter sedisputes between the Centre and states. Therefore, an appropriate dispute resolution mechanism should be put in place to ensure harmonised GST laws. To deal with such disputes, Article 279A ( 11) of the GST Bill confers powers on the GST Council to establish the mechanism to adjudicate any such dispute, which arise out of the suggestions of the Council.

While the need for having a strong inter se dispute redressal system cannot be emphasised enough, it cannot be overruled that Article 279A ( 11) in its present form could raise various contentious constitutional and legal questions.

The first question is whether the recommendation by this executive/ administrative body ( even though constitutional) can be binding on the Centre and the states. In case such, recommendations are made absolutely binding, without any degree of tolerance or fiscal freedom, the same would be open to constitutional challenge on the ground that the GST Council has been given overriding supremacy over Parliament and the state legislature, which is against the basic structure of the Constitution.

For the same reasons, if an otherwise valid legislation enacted by Parliament or state legislature is subjected to scrutiny by the Council on the ground the same deviates from its recommendations, such scrutiny may also not be free from constitutional challenge. Secondly, the provision in its present form might also be in violation of the basic principle of natural justice as GST Council has been given the powers to adjudicate the disputes arising from its own recommendation.

Thirdly, under Article 131 of the Constitution, the SC has been granted an exclusive jurisdiction for any dispute between the Centre and states. Accordingly, creation of any alternative dispute resolution mechanism without having sufficient constitutional sponsorship may also be open to constitutional challenge.

In view of the above, it is hoped the legislature would foresee the possible challenges to the dispute resolution mechanism in the present form and ensure the important economic reforms would not get stonewalled because of prolonged litigation into constitutional propriety. In any case, it is desirable that the Centre and state governments respect the GST Council as a consensus building platform.

Business Standard New Delhi, 08th August 2016

Household debt up, but India still lags emerging-market economies: RBI

Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...

External spillovers likely to hit India's financial system: RBI report

While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...

CA Online

Search This Blog