GST model law: Long way to go to meet expectations

A sub-committee of the Empowered Committee of State Finance Ministers has released a model law for the goods and services tax (GST) and the integrated goods and services tax. This model law would form the basis for the central government to levy and administer central GST and for states to levy and administer state GST.

Perfecting the model law is just one of many challenges facing the central government, which is striving to have the GST constitutional amendment bill passed by the parliament. Other challenges are finalizing a revenue neutral rate and building IT infrastructure that is robust enough to support the new tax system.

The model law appears to be a creation of umpteen minds with different expertise and domain knowledge resulting in a hotchpotch of varied provisions. It seems to be a case of “too many cooks spoiling the broth”.

The cluttered state of the model law released ahead of the pending amendment of the constitution deserves a sincere review if it is to be legislated by the parliament and states and become the basis for India’s ambitious game changing tax reforms of GST.

Definitions

The model law lacks conceptual clarity and is replete with lacunae. To point out a few blunders, the terms “composite supply” and “declared services” have been defined, but neither of these has been used in the provisions other than the definition clause, effectively rendering these definitions useless.

Ranjeet Mahtani is an associate partner, Rajat Chhabra is a senior associate and Ketan Tadsare is an associate manager at Economic Laws Practice. This article is intended for informational purposes and does not constitute a legal opinion or advice.