Wednesday, March 10, 2010


The Constitution of India, a symbolic ideal of Sovereignty, Socialism, Secularism, Democracy and Republicanism in the global scenario, was enforced since the 26th day of January, 1950. It is like the holy Geeta in the Hindu Philosophy in socio-economic and political-administrative spheres of the country in as much as the national activities are carried on and are governed by its formulated principles and guide lines. While it laid down the divergent powers and functions of the Centre and the States, any clash or conflict in the field of power exercise is not generally visible.

Introduction of sales tax measures in Assam

Article 246 of the Constitution empowered Parliament and the States Legislatures to make laws on the subject, specified in the Seventh Schedule:
246(1)- The powers to make law in respect of the matters, enumerated in List-1 (Union List) of the Seventh Schedule of the Constitution has been vested upon Parliament.
246(3)- The powers to make law in respect of the matters, enumerated in List-II (State List) of th Seventh Schedule, of the Constitution, has been vested upon the States Legislatures.
246(2)- The powers to make law in respect of the matters, enumerated in List-III (Concurrent List) the Seventh Schedule of the Constitution, has been vested upon Parliament and subject to clause (1) of Article 246 of the Constitution to the State Legislatures.
The tax on the Sales and purchases of goods within the State, as enunciated in entry 54 of List II of the Seventh Schedule, is a State subject, while the tax on the sales and purchase of goods in the course of inter-State trade or commerce, as envisaged in entry 92A of List I of the Seventh Schedule
of the Constitution, is a Union subject.
The Assam Sales of Motor Spirit and Lubricants Taxation Act, 1939, a measure of tax on the sales of petroleum and lubricants was introduced from 1.4.1939 under the authority of Section 100(3) read with entry 48 of the
Government of India Act, 1935 This act was repealed and replaced by ‘ The Assam (Sales of Petroleum and Petroleum Product including Motor Spirit and Lubricants) Taxation Act, 1955 on 1.5.1956 under the authority
conferred in List II entry 54 of the Seventh Schedule of the Constitution. After the independence of India, but before
the adoption of the Constitution of India, a new measure tax on the sales or purchases of goods was introduced and ‘ the Assam Sales Tax Act, 1947’ came into effect from 24.12. 1947. Thereafter, a measure of tax on the sales or
purchases of some specified goods, imported from out side the Assam or such identical goods manufactured, made or processed in State was introduced with effect from 1.7.1956 by enactment of the Assam Finance (Sales Tax) Act, 1956. With the said authority a tax measure was as well adopted on the last point purchase of some specified goods by way of enactment of ‘the Assam Purchase Tax Act, 1967 from 3.7.1971. All these taxation Laws were amalgamated consolidated and amended to give birth to the unified ‘ Assam General Sales Tax Act, 1993 on

Central Sales Tax measures
Parliament enacted ‘the Central Sales Act, 1956’ for the purpose of levy of tax on the sales made in the course of inter-States sales-purchases by virtue of the aforesaid powers and the same was effective from 5.1.1957. This tax
measure obviously provided a strong guard In respect of inter-State deals made between one State and another and it ensured proper levy and collection of taxes at the State level as well.

General Sales Tax

The traditional and chronological exercise of levy of tax on the sales or purchases of goods in the States since 1939 made way for acceleration of revenue trend and it played a pivotal role in the healthy growth of economy of
Assam. The Assam General Sales Tax Act, 1993 plugged some persistent lacunae and upgraded the power exercise scenario by the taxing Authorities for smooth and efficient administration.

Value Added Tax
The prolonged tax measures got a halt and a changed system of tax measure came into effect from 1.5.2005 by enforcing ‘the Assam Value Added Tax Act, 1993’ (VAT). VAT is a multifarious system of tax to be levied and
collected at every stage of sale subject to, however, the refund of the tax paid (in put) on the previous purchase of goods. In fact, following heavy pressures from the international fiscal agencies, like World Bank, Asian Bank,
International Monetary Fund etc., the Government of India made an imposition to the State Governments to introduce the VAT Regime in the States without allowing thm to judge and opine on the propriety of dispensing with the prolonged heritage. The heavy pressure from the Govt. of India alerting against the providing monetary support etc. compelled the States to agree. Assam was the first State to welcome the proposal. The neighbouring territories like Bangladesh, Nepal, Pakisthan and Sree Lanka already introduced this system of VAT. These small countries found no difficulty to proceed on.
There is no denial of fact that VAT is a unique and methodical system of tax. It is self-designed and moved by self-driven wheels. That means, the success of VAT regime is entirely dependable on the honesty, sincerity and good will of all sections of people, traders and the tax machinery. India is a Federal structure of country with the conglomeration of as many as 28 part-States and 7 Union Territories. The Constitution provided power to the States to frame the sales tax law for levy, collection and augmentation of revenue vis-à-vis ensuring the growth of economy. The centre’s imposition to make uniform rates of tax of different commodities could not be rigidly maintained by the States, as the safe guard of public interest was equally imperative.It is pertinent to say a large section of people of Assam are illiterate or half literate. They are not capable enough to abide by the requirements, conditions and restrictions of the VAT law. The issue of ‘Tax Invoice’ and ‘Retail Invoice’ are not properly and rigidly enforced, which resulted in improper and inaccurate maintenance of accounts. So, this amounted to be a farce. The
claims of Input tax credit lack proper discipline. There is acute collusion and collaboration between the traders, customers and the tax machinery in the tax dodging episode on which no proper and adequate preventing, arresting and detecting measures have been enforced.
The main theme of the VAT is to levy tax at every stage of sales, but to the utter deviation of the said principle, the Govt. of Assam adopted the measure of tax at the stage of first sales on some commodities, like crude oil, petrol, diesel, petroleum products, tea, liquor, bitumen etc. in the VAT Law Assam. The incorporation of tax free sales of oil products between Oil Companies seem be detrimental to the ideology, norms and procedure of either the VAT regime or first point tax scenario. The system of payment of composition of tax on the production of brick (not on sale) , import of marble (not on sale) and on the total value of works contract (instead of transfer of property of goods) seems to abusive of the constitutional footing, as envisaged in Article 366 (29A) of the Constitution. The composition of tax levied and collected at source obviously created a systematic fracture in the process of realization of tax on subsequent sales and inter-State sales. The VAT regime was thus on the way of crack down the clock-wise deals. It is believed that the system of VAT regime did not yield the expected revenue generation scheme. The States like Assam is maintaining the revenue equilibrium on the first point sales of taxable goods. Assam is an industrially backward State. The major industries like oil sectors, tea sectors have been isolated in the VAT net of Assam. Any short supply of crude oil has the consequential effect of deficiency in collection of sales tax.
Goods and services tax
It has been learnt from the news media that the Government of India has proposed to introduce ‘the Goods and Services tax’ in the country in replacement of the present VAT regime from 1.4.2010. It may not, however, be done immediately, as the States are not central exercise duty and for that purpose, the Constitution will be amended. That means, the States are likely to lose matter of traditional sales tax revenue administration.
We expressed our apprehension before the VAT regime was proposed to be introduced projecting some ill consequences in the measure. Such apprehension, we believe partly accomplished. We also endorse our similar anxiety and apprehension on the proposed measure of ‘Goods and Services tax.’
We hope, the Government of India will not unilaterally take such a decision by the seizing the power of the State and consider it to be incumbent to hold marathon discussions with the States’ economists, intellectuals in a phase manner on this grave and austere thought provoking issue.

(Mrinal Kanti Chakrabartty)

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