Indian Constitutional View of The Effects of GST

ABSTRACT

In India, taxation is broadly classified into two categories: direct taxes and indirect taxes. Direct taxes include those levied on income and profits, while indirect taxes encompass duties such as excise, customs, and more recently, the Goods and Services Tax (GST). The introduction of GST streamlined the complex system of indirect taxes by subsuming multiple levies under a unified framework. This comprehensive tax aims to simplify the structure and bring uniformity across the nation. The Goods and Services Tax was implemented following the 101st Constitutional Amendment Act of 2016 and officially came into effect on July 1, 2017. This amendment enabled both the Central and State Governments to levy and collect GST, necessitating uniform legislation across all Union Territories, States, and at the national level. As such, a constitutional revision was required to facilitate this change. The reform replaced various taxes, including excise duty, VAT, and service tax, with a consolidated tax regime. It also introduced key constitutional provisions— Article 279A, which established the GST Council and granted legislative authority over GST to both Parliament and state legislatures, and Article 246A, which empowered them to enact GSTrelated laws. Moreover, the amendment provided for a five-year compensation mechanism to support states in adjusting to potential revenue losses due to the GST transition. Overall, the main objectives of GST were to create a unified national market, eliminate the cascading effect of taxes, and improve tax compliance. These goals were aimed at fostering economic development. This paper explores the background, objectives, types, benefits, drawbacks, and challenges associated with the Goods and Services Tax in India.