Importance and nature of charging section:
1.1 Article 265 of the Constitution of India mandates that no tax shall be levied or collected except by the authority of law. Charging section is a must in any taxing statute for the purpose of levy and collection of tax. Before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section. No one can be taxed by implication.
Section 7: charging section
1.2 Section 7 is the charging section for imposition of GST on intrastate supplies of goods and services. The said section provides that:
– GST shall be levied on all intra-state supplies
– of goods and services
– at the rate specified in schedule to the GST Act
– such tax shall be collected in such manner as may be prescribed
1.3 As per the 122nd Constitutional amendment proposed in respect of introduction of GST, article 286 provides that no law of a state shall impose a tax on supply of goods or of services or both where such supply takes place:
(i) outside the state,
(ii) in the course of import of the goods or services or both into, or export of the goods or services or both out of, the territory of India
1.4 Furthermore it has also been specified in article 246A that Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of interstate trade or commerce.
1.5 Thus, no state has power to charge tax on supply of goods or of services or both in case such supply take place outside the state, in the course of import or export, or in the course of interstate trade or commerce. Accordingly, vide the GST law , tax would be imposed only in respect of intrastate supplies.
1.6 Under the said GST law, even the union Parliament has restricted the imposition of tax only in respect of intrastate supplies; and tax on supplies taking place in the course of interstate trade or commerce is dealt with under the provisions of IGST law.
1.7 It is also pertinent to note that the power to declare the principles for determining as to when supply of goods or services shall be construed to take place outside the state, or in the course of import and export, or in the course of interstate trade or commerce is vested with the Parliament of India vide the provisions of article 286 and 269A. These principles are required to be formulated by law made by the Parliament.
1.8 Accordingly the principles for determining when supply of goods or services is to be construed as being in the course of interstate trade or commerce have been set forth in section 3 of the IGST law. Interestingly, though the proposed Constitution has invested the power of the Parliament to declare as to when a supply takes place outside the state, the IGST law seeks to define as to when the supplies of goods or services shall be considered to be taking place in the course of interstate trade or commerce.
1.9 In our view, exercise of power by the legislature in defining supplies in the course of intrastate trade or commerce may be debatable, however for now we are not engaging ourselves in that direction.
1.10 Vide section 3A of the IGST law a supply is considered to be in the course of intrastate trade or commerce if location of supplier of goods/services and the place of supply are in the same state. Charge/levy of GST is attracted as soon as any such supply i.e. in the course of intra-state trade or commerce arises.
1.11 It is pertinent to note that in such cases there shall be imposition of following two taxes simultaneously and parallelly:
a. imposition of CGST by the Parliament of India,
b. imposition of SGST by the respective State
1.12 Thus, the provisions of GST law made by the Parliament, and the GST law made by that particular state would simultaneously apply to every single supply made in the course of interstate trade or commerce. Accordingly in respect of each such supply, there shall be liability to pay both CGST and SGST to the respective governments at the rates prescribed under the respective legislations made by the Centre and the State.
1.13 Illustration: A, a shopkeeper sells stationary to B at his shop located in Delhi. Tax shall be imposable under GST as follows:
Sale Price = Rs 100
(+)Central GST (Say 12%) = Rs 12
(+) Delhi GST (Say 8%) = Rs 8
Total amount charged by A would be Rs. 120
1.14 In this regard this tax is unique as compared to the taxes which we are currently experiencing under the pre-GST regime. In the current regime, in respect of each event only one of the two, legislatures namely either the Parliament or the State has exclusive competence to charge tax. Currently there is no concurrent power of taxing the same transaction/event by both the Parliament and the States. The advent of GST would however bring about a complete shift in the taxing pattern under indirect taxes.
Importance and nature of charging section: