Critical study of provisions of CENTRAL GOODS AND SERVICES TAX ACT, 2017–( in short CGST) Section 11 about Power to Exempt which is part of CHAPTER III -LEVY AND COLLECTION OF TAX. –9th article in the series.

[DEV KUMAR KOTHARI]

Before discussion on power of Exemption, relevant definitions and meaning are necessary to clarify that in context of CGST and States GST Act relavnt meaning are to be considered. These are discussed below. More discussions can be referred in earlier articles.

Statutory Provisions

CENTRAL GOODS AND SERVICES TAX ACT, 2017

Definitions.

2. In this Act, unless the context otherwise requires,––

(36) “Council” means the Goods and Services Tax Council established under article 279A of the Constitution;

(53) “Government” means the Central Government;

(21) “central tax” means the central goods and services tax levied under section 9;

(103) “State” includes a Union territory with Legislature;

(104) ―State tax means the tax levied under any State Goods and Services Tax Act;

Discussion on these are found in earlier article in series.

Section 11 with highlights added for analysis:

Power to grant exemption from tax.

11. (1) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification.

(2) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by special order in each case, under circumstances of an exceptional nature to be stated in such order, exempt from payment of tax any goods or services or both on which tax is leviable.

(3) The Government may, if it considers necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification issued under sub-section (1) or order issued under sub-section (2), insert an explanation in such notification or order, as the case may be, by notification at any time within one year of issue of the notification under sub-section (1) or order under sub-section (2), and every such explanation shall have effect as if it had always been the part of the first such notification or order, as the case may be.

Explanation.––For the purposes of this section, where an exemption in respect of any goods or services or both from the whole or part of the tax leviable thereon has been granted absolutely, the registered person supplying such goods or services or both shall not collect the tax, in excess of the effective rate, on such supply of goods or services or both. 

Observations and discussions:

Satisfaction of Government about the public interest so to do, and recommendations of the Council, are preconditions. Exemption will be by notification,. Exemption can be general, either absolutely or subject to  conditions specified therein, for  goods or services or both of any specified description . Exemption can be from the whole or any part of the tax leviable thereon with effect from date as may be specified in such notification. The exemption can also be granted by a Special order vide sub-section (2).

There are also provision made for inserting Explanation in notification or order. In both cases insertion will be by notification. Such insertion can be made within one year from the date of notification or order and will have effect as if it was from the date of notification or order. There seems no requirement of recommendation of the Council for such insertion.

Where an exemption has been granted absolutely, the registered person supplying such goods or services or both shall not collect the tax, in excess of the effective rate, on such supply of goods or services or both.  However, where exemption is granted subject to some conditions, the matter would be different. It will depend on conditions contained in notification or order as the case may be.

All these shows that provisions relating to exemption are also not worded in simple language and notifications and orders also need to be examined very carefully before availing exemption.

State Government and power to exempt state tax:

State government has also similar provisions in State GST Act. For example in the  Andhra Pradesh Goods and Services Tax Act, 2017 we find the following provision:

Council (36) “Council” means the Goods and Services Tax Council established under article 279A of the Constitution of India; 

 (53) “Government” means the Government of Andhra Pradesh;

(103) “State” means the State of Andhra Pradesh;

(104) “State tax” means the tax levied under this Act;

Power to grant exemption from tax.

11. (1) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification.

(2) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by special order in each case, under circumstances of an exceptional nature to be stated in such order, exempt from payment of tax any goods or services or both on which tax is leviable.

(3) The Government may, if it considers necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification issued under sub-section (1) or order issued under sub-section (2), insert an explanation in such notification or order, as the case may be, by notification at any time within one year of issue of the notification under sub-section (1) or order under sub-section (2), and every such explanation shall have effect as if it had always been the part of the first such notification or order, as the case may be.

(4) Any notification issued by the Central Government under sub-section (1) of section 11 or order issued under sub-section (2) of the said section of the Central Goods and Services Tax Act, 2017 (Act No.12 of 2017.) shall be deemed to be a notification or, as the case may be, an order issued under this Act.

Explanation:- For the purposes of this section, where an exemption in respect of any goods or services or both from the whole or part of the tax leviable thereon has been granted absolutely, the registered person supplying such goods or services or both shall not collect the tax, in excess of the effective rate, on such supply of goods or services or both.

Other States have also law on similar lines.

Therefore, harmony is found in various GST Laws because of governance by the Council by way of mandatory recommendations required as precondition in most of provisions.

Meaning of Council is the same in CGST Act and State GST Act. The same is further discussed in the following table:

(36) “Council” means the Goods and Services Tax Council established under Article 279A of the Constitution;

This is not a definition clause but is about Constitution of GST Council. The Article 279A of the Constitution provisions are made for constitution of GST Council. Some other important provisions of COI about GST council  include Art.246A- Special provision with respect to goods and services tax. Definition clause in COI that is article 366 vide sub clause (26B)  mentions that  “State” with reference to articles 246A, 268, 269, 269A and article 279A includes a Union territory with Legislature] ; Article 368 is about Power of Parliament to amend the Constitution and procedure therefor. It provides that an amendment to Article 279A  shall also require to be ratified by the Legislatures of not less than one-half of the States by resolutions to that effect passed by those Legislatures before the Bill making provision for such amendment is presented to the President for assent.

Thus, the very same Council makes recommendations for CGST Act and SGST Act. Thereby  harmony is maintained to keep uniformity  in CGST Act and various States GST Act  with necessary adaptations.