TAX LAWS ON SALES OR PURCHASES OF GOODS (On local sales and inter-State sales)

             “No Government can exist without taxation. The money must necessary be levied on the people; and the grand art consists of levying so as not to oppress the people”- Frederik the Great of Russia. The famous diplomat and economist in the Mauryya empire, “ Chanakya” or ‘Kautilya”, on the other hand, observed- “The king shall  first reform the administration, by punishing appropriately those officers, who deal in wealth; they duly being corrected, shall use the right punishment to ensure good conduct of the people of the town and the countryside.” These two folds of observation are indeed the guide-lines in proper conduct of tax administration in the State as well the country as a whole.

            Law is a weapon to carry on the administration in a proper and smooth way, so as to ensure proper collection of tax revenue as well to augment the position of the State Exchequer, by way of undertaking and implementing the plans and programmes for the welfare of the people as well as the development of the State. Our instant topic of discussion is on “tax on sales or purchases of goods within Assam or in the course of inter-State trade or commerce under the banner of the taxation laws, operative within the State of Assam.”

Taxation laws on sales or purchases of goods locally in Assam

           The State tax machineries are equipped with two folds of taxation laws for the purpose of administration in the matter of levy and collection of taxes with other allied matters, connected therewith. Those are : “The Assam Value Added Tax Act, 2003 (VAT Act), operative from 01.05.2005” and “The Central Sales Tax Act, 1956 (Central Act), operative from 05.01.1957.” .The former is an State Act, enacted at the behest of the Legislatures of Assam, while the second one is a Central Act, enacted by Parliament long 55 years aback. The former taxation law was adopted by the State Legislatures of the State under clause (3) of Article 246 read with entry 54 of List-II (State List) in the Seventh Schedule of the Constitution of India (Constitution), while the latter was enacted by Parliament by virtue of the powers conferred by clause (1) of Article 246 read with entry 92A of List-I (Union List).

        The ‘Sales tax law in Assam’ had a long background. Under the authority conferred by the Government of India Act, 1935 in sub-section (3) of Section 100 read with entry 48 of List II (State List), the Provincial Legislative of Assam first enacted “ The Assam Sales of Motor Spirit and Lubricants Taxation Act, 1939”, which was repealed and substituted by the “ The Assam (Sales of Petroleum and Petroleum Products, including Motor Spirit and Lubricants) Taxation Act, 1955” with effect from 01.05.1956. Thereafter, under the said authority conferred by the Government of India Act, 1935, a tax law on sales or purchases of goods within the State of Assam came into force from 24.12.1947 in the post- independence period. After adoption of the Constitution on 26.01.1950, the Legislature of Assam enacted “The Assam Finance (Sales Tax) Act, 1956” with effect from 01.07.1956 with a view to levy tax on the goods, imported from the places out side the State of Assam and also on the goods manufactured and processed in Assam under the authority of entry 54 of the State List, as discussed in the first para above read  with clause (a) of Article 304 of the Constitution  Likewise, a tax on the last purchase of goods in Assam was enacted under the title “ The Assam Purchase Tax Act, 1967”on the same footing of the Constitution and it came into effect from 03.07.1971.” All these Acts were amalgamated, consolidated and amended and a new Act, namely; “The Assam General Sales Tax Act, 1993” was brought into existence with the date of operation from 01.07.1993. The VAT Act is a new measure of tax in supersession of the AGST Act.

               The liability to pay tax under the VAT Act arises at every stage of sale affected in Assam, subject to credit of input tax paid at the time of previous purchase of goods with the way of functioning, designed in this respect. The measure of tax on such goods were adopted in respect of some specified goods with the rates of tax, presently @ 5 paise in the rupee @ 1 and 2 paise in the rupee, some unclassified goods, transfer of property in goods, involved in works contract and transfer of right to use any goods for a specified period under lease @ 13.5 paise in the rupee.

              In addition to the above, a series of goods with different rates of taxes were incorporated in the Schedules of the VAT Act, which were designed as taxable at the point of first sales in Assam, contrary to the principle laid down in the theme of the VAT Act for levy of tax at every stage of sales of goods made within the State of Assam. This tax measure seems to be irrelevant in the VAT scenario, which is nothing but a measure of value added tax in the series of multiple points of tax right from the manufacturer or importer upto the level of the sales made to the consumers. However, the administration of the VAT Act is being carried on with yield of increased quantum of collection, which reached to Rs. 5136.36 crores in the year 2011-12 against Rs. 3952.20 crores in the year 2010-11. The collection of tax and proper administration of tax laws can not be at par and both have separate entity.

Taxation law on the sales or purchases of goods in the course of inter-State trade or commerce

              The taxation law on the sales or purchases of goods in the course of inter-State trade or commerce, namely; the Central Act has been made operative since 05.01.1957, as stated above, and the administration in the matter of levy of tax under the said Act with other allied matters, is being carried on till now. The enactment of this Act was a product of authority conferred by amendment of Article 269 of Constitution vis-à-vis insertion of a new entry 92A in the Seven Schedule of the Union List, when it was felt incumbent that the levy of tax was imperative on the continuous growing trend of the sales or purchases of goods in the course of inter-State trade or commerce.

Powers and functions of the Central Act to be governed by the general sales tax law of the State (viz VAT Act)

             Sub-section (2) of Section 9 of the Central Act provided :- “The authorities, empowered to assess, re-assess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall on behalf of the Government of India assess, re-assess, collect or enforce payment of tax including any interest or penalty, payable by a dealer under this Act, as if the tax or interest or penalty payable under the general sales law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State. The said sub-section also laid down that all the provisions relating to return, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of tax liability of a person carrying on business on transferee of or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of any dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, review, revisions, references, refunds, rebates, penalties charging or payment of interest, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly.”

           Sub-section (2A) of the said Section 9 of the Central Act, on the other hand, laid down, as follows:

          “All provisions relating to offences, interest and penalties (including provisions relating to penalties, in lieu of prosecution for an offence in addition to the penalties or punishment for an offence,( but excluding the provisions relating to matters provided in Section 10 and 10A) of the general sales tax law of such State, shall with necessary modification shall apply in relation to the assessment, re-assessment, collection and enforcement payment of payment of any tax required to be collected under this Act in such State or in relation to any process connected with such assessment, re-assessment, collection or enforcement of payment, as if, the tax payable under this Act were a tax under such sales tax law.”

         The implication of the above provisions of the Central Act is very clear. It provided a broad guide line to carry on the administration in certain matters in respect of the provision of the said Act under the provisions of the VAT Act.

         The Central Act contained some independent provisions of law , which are to be administered independently without taking resort to the provisions of Sub-section (2) and (2A) of Section 9 of the said Act. Those are,  inter-alia, “(i) Provisions relating to Import and Export (Section 5); (ii) Liabilities to pay tax on inter-State sales, exemption in course of sales of goods by transfer of the title of the goods during the course of movement from one State to another (Section 6);  (iii) Transfer of stock of goods out side the State ( Section 6A));(iv) Registration of the dealers (Section 7); (v) Rate of tax on the sale in course of inter-State trade or commerce(Section 8); (vi) Penalties (institution of case in the court of law) (Section 10); (vii) Imposition of penalty in lieu of prosecution (Section 10A), (viii) Cognizance of offences- sanction and trial (Section 11)………..”

       It will be seen that the above provisions of the Central Act were not incorporated in Sub-sections (2) and (2A) of Section 9 of the Central Act and as such the same are to be administered independently under the statutory provisions of the said Act itself, implying thereby that, the aforesaid provisions will have no scope for governance towards carrying on the administration under the provisions of the VAT Act. For the present, we take up for discussion on a particular topic ‘Registration’, as occurred in Section 7 of the Central Act.

     The Government of India by a Notification No. SRO 643 dated 22.02. 1957, issued under Sub-section (1) of Section 7 of the Central Act, specified the competent authorities to whom the application of registration under the Central Act is to be filed vis-à-vis the onward action to be taken in the matter. Such competent authority, specified in the aforesaid notification, is inter-alia, the authority, competent to register a dealer under the general sales tax law of the State (that, is the VAT Act), if any such dealer is liable for registration. There is no question of delegation of power under the VAT Act or any power of governance in the matter of administration of the registration proceedings under the provisions of the VAT Act.

      The fragments of Section 7 of the Central Act relation to registration are :-“ (i)  Sub-section (1) -A dealer liable to pay  tax is to apply for registration; (ii) Sub-section (2) : A dealer, purchasing goods from other State in the course of inter- State trade or commerce, is to apply for registration; (iii) Sub-section (3) - Registration of a dealer for liabilities under Sub-section (1) & (2); (iv) Sub-section (2A) Security required to be furnished by a dealer for reasons to be recorded by the competent authority thereof; (v) Sub-section (3A) – Additional security to be furnished by the dealer for proper payment of tax and proper custody and use of the Forms to be furnished by dealer for reasons to be recorded by the competent authority thereof; (vi) Sub-section (3-B) Security or additional security are required to be furnished by the competent authority after giving an opportunity of being heard; (vii) Sub-Section (3BB)- The quantum of payment of the amount of security or additional security made  in the form of surety bond and such surety, if  becomes insolvent or dies, the dealer is to inform the competent authority in this respect and to furnish fresh surety for the amount of the bond; (viii) Sub-section (3D) forfeiture of the amount of security in full or part thereof for realization of amount of tax and penalty to recover the loss for misuse of the Forms, subject to providing of an opportunity provided to the dealer of being heard; (ix) Sub-section (3E)- To demand fresh security, in case the amount of security is found to be insufficient; (x) Sub-section 3(F)- Refusal to issue fresh Form for non-compliance with requirements to furnish security; (xi) Sub-section 3(G) -To refund the amount of security or part thereof by the competent authority on application to be filed in this behalf by the dealer, when it is not required for the purpose of the Central Act; (xii)  Sub-section 3(H), 3(I) and 3(G) – filing of appeal before the appellate authority, when a dealer is aggrieved by the order of the competent authority in relation to order for furnishing security or additional security, hearing and order passed thereon; (Sub-section (4) & (5) Amendment or cancellation of the Certificate of Registration on application by the dealer or on motion by the competent authority, granting the same.

          Apparently, therefore, the competent authority, notified under sub-section is the actual authority to exercise the powers under Section 7 of the Central Act, except the power of the appellate authority against the order of security and additional security is to be exercised by a separate forum on application filed in Form 5A, specified in the Assam Rules of the Central Act. The ‘appellate authority’ has been defined in clause (aaa) of rule 2 of the Assam Rules of the Central Act, but the rule is not very much clear in regard to such appellate authority.

          It has been found that confusions have been cropped up in the spheres of administration of the provisions of Section 7 of the Central Act and the matters connected therewith, like; demand of security, additional security, forfeiture and refund of security and additional security amongst the taxing authority, competent to make administration of the Central Act. In the matter of requiring to furnish the additional security, the mandatory provisions of the sub-section (3A) and (3B) of Section 7 of the Central Act are neither observed nor given proper cognizance to the same. Some matters, as it seem, are sought to be governed by the provisions of the VAT Act, which ,in fact, seems to be  unwarranted and irrelevant with a wrong coverage given to cause acute hardship and inconveniences to the dealers by way of misinterpretation of the provisions of the Central Act. A farce is in sight in the name of refund of security instead of forfeiture of security at the intermediary stage in the normal way of functioning.

     In order to make a halt in respect of such a shortfall, it is hoped that the implications of the relevant provisions of the Central Act, where the power of administration of the Central Act has been vested to function independently, without resorting to the provisions of the VAT Act, may be studied properly and a review is made by the highest authority of the tax administration of the State so as to make a solution of the prevailing controversy. For that purpose, a free and constructive dialogue is considered necessary to come to a consensus.

AVERT DRAINAGE OF OIL TAX REVENUE IN ASSAM

The mineral oil of Assam is contributing substantial amount of tax revenue to the State Exchequer. This is derived from crude oil, extracted from the oil fields of Assam. The crude oil- potentiality was there since centuries back, but no efforts or endeavour were there to unearth the said potential resources. After fall of the Ahom regime, the British Raj started its reign in this territory, consequent upon execution of Yandabu Treaty with the Mans in 1826 A.D. The British Raj had full conviction in mind that the soil of Assam bears acute potentiality in the field of agriculture, forest and mineral resources and there was ample scope for acceleration of economy.

The tea plants were discovered in abundance in the forest areas of Upper Assam. There was strong hunt to unveil such potential resources in other nearby areas. They started wide range of expedition giving priority to undivided Sivasagar and Lakshimpur districts. When achieved, this was extended to the western and southern part of the State. Gradually, they installed factories, adjacent to the tea garden areas and started commercial production keeping in mind to make growth of economy. The quality of Assam tea was excellent. Consequently, the Assam tea occupied a prominent place in the global market. The flow of income was by leap and bounds. There was no measure of tax on the sale or purchase of tea at the early stage. The same was introduced from the 24^th December, 1947, when the Sales Tax Law came into operation in the State. Of course, a tax law on income of agriculture was introduced from the 1^st April, 1939, which till now remains operative.

The British Raj equally felt that there was potentiality of mineral oil in the soil of Assam. The casual flame of fire was visible in soils, from time to time. A drilling operation was started in the year 1867. Ultimately, it yielded a positive result and for the first time in the history of Asian continent, crude oil field was discovered in Digboi area of the present Tinsukia district in the year 1889 A.D. Steps were taken to establish a mini oil refinery at Digboi and it was commissioned in 1901. Gradually, some more oil fields were discovered in and around Digboi including the Makum area. It is worthy to mention that this refinery used to feed fuel to the military convoy on its way to the war field in Burma area (now Myanmar), when Word War II was in full swing.

In the middle part of twentieth century, a good numbers of oil fields were discovered in a number of places in Sivasagar and Dibrugarh districts. The Government of India (Central Government) instead of installing a big-sized refinery in Assam, planned to pump out such crude oil to the Barauni Oil Refinery of Bihar. Naturally, a great irritation cropped up in the minds of the people Assam and they started agitation protesting against such odds depriving the people of Assam to get the legitimate benefit on the State resources. The decision of the Central Government was to give cognizance to the accrued anger of the people and pacify them by installing another medium sized refinery in Noonmati area in the heart of Guwahati city was an act of betrayal in as much as the Central Government simultaneously took decision to pump out a major quantity of such extracted crude oil to Barauni Refinery of Bihar. The Barauni refinery at earlier stage did not pay tax on such inter-State sales of crude oil to the State of Assam and challenged any act of levy. Fortunately, the Supreme Court of India (Apex court) delivered a historical judgment affirming the claim of the Government of Assam in getting its lawful revenue on such sales. Thereafter, during the regime of Mrs. Indira Gandhi, piloting the Indian Government, a refinery was installed at Dhaligaon of Bongaigaon to be fed by the crude oils, extracted from the soil of Assam. A big-sized oil refinery was as well installed at Numaligarh of Golaghat district, which is a product of six years’ long Assam movement on the foreigners’ issue at the behest of the All Assam Students Union (AASU), associated by many other like mined political and non-political organizations..

The Legislatures of Assam incorporated the item ‘crude oil’ in the tax schedule of the Assam Entry Tax Act, 2001(Entry Act) from the 4^th October, 2004 making way to levy tax vis-à-vis to augment the State revenue of the State in respect of import of such goods from places out side the State of Assam to a local area in Assam as well as in respect of such import from one local area to another local area within the State of Assam. As a consequence, barring the Digboi refinery, all other refineries were roped in the tax net of the Entry Act. The Entry Act of 2001 met with a serious challenge and the Gauhati High Court declared the said Act as unconstitutional and held to be void. However, the said Act was reintroduced from 1^st June, 2008 with a retrospective effect and validated the tax levy and realization including the tax to be realized in the interim period of non-existence and non-operation of any EntryAct. The matter is reported to be under sub-judice of the Apex Court.

Parliament introduced a provision in the Central Act in 1972, whereby any dispatch of taxable goods to places out side the State not by reasons of sales, but by way of stock transfer has been made admissible for exemption of tax under the said Act. Previously, such exemption of tax was conventional, but now it was legalized. As a matter of fact, such exemption of tax has a constitutional sanction in as much as sub-clause (a) of clause (1) of Article 286 of the Constitution restricted the State any levy of tax on the goods, so moved and sold out of the State. The provisions of Central Act, however, strictly laid down conditions that- (i) for such exemption, the burden of proof rested with the dealer, claiming such stock transfer vis-à-vis exemption of tax; (ii) the documents and evidences of dispatch and sales are to be produced; (iii) a declaration in Form ‘F,’ containing, the dispatch particulars, transfer invoices, value of the goods, so moved; (iv) the exemption of tax is not automatic and it is subject to enquiry by the competent taxing authority, allowing such exemption. As a part of inquiry, the said authority may insist on the compliance of the requirements, as laid down in sub-rule (4) of Rule 4 of the Central (Assam) Rules, 1957. Another, note worthy point, which is to be taken into consideration is that an ‘agreement’ in regard to such stock transfer and ‘sale’ out of the State and the ‘sale notes’ confirming, inter-alia, payment of tax in the respective State, as ought to have received by the transferor of the goods, is to be produced.

Form ‘F’ clearly specified that such movement of goods on stock transfer should be made by road transport, railway, steamer, air or post office and not other wise and furnishing the dispatch particulars in the said form viz consignment notes & dates etc. has been made imperative.

It has, of late, come to the light that some Oil refineries of Assam have been making the transfer of stock of ‘petrol’ and ‘diesel’ through pipe lines installed by them. This is a unilateral arrangement and the ball of such stock transfer remained at the court of such refinery. No organization for movement of such oil products was involved in the scenario. The taxing authorities might have entertained such claims of exemption. Whether such episode of stock transfer through pipe lines, has really any legal base? In such self-designed exercise, it is apprehended that the drainage of crore of State revenue has become obvious. A coparative study of the Central tax revenue collection for last three or four years may unveil the actual position.

We hope, this discussion will receive attention of the Government of India to find out a suitable remedy.

TAX ON INCOME

‘Tax’ means ‘the money that is to be paid to the State; charged as a proportion of personal income and business profits or added to cost of some goods and services’ ‘ Income’ means ‘a money received during a certain period for work or from investment.’ “Agriculture’, on the other hand, means ‘a science or practice of farming.’ ‘Tax on income’ is thus money to be paid on the profits earned by any person or organization for works or investment, while; ‘Tax on agricultural income’ is ‘the money that is to be paid on profit earned on the practice of farming.’

‘Tax on income’ is a subject, administered by the Government of India (Central Govt.) through the machineries at its disposal. Article 246(1) of the Constitution of India (Constitution) empowered Parliament to make enactment of laws on the subjects, specified in the Seventh Schedule- List I (Union List). ‘Tax on income other than agricultural income’, as occurred in entry 82 of the said Schedule is thus a tax to be levied by the Central Government for the purpose of augmentation of the Central revenue. In fact, the measure of tax on income in India was introduced in British Parliament long back in 1860 to bear the economic burden on account of armed revolution of the First War of Independence against the British regime. The reasonableness of such measure of income tax adopted, were assigned as : it is a (i) canon of ability for paying such tax; (ii) canon of certainty; (iii) canon of convenience and (iv)canon of economy. There was, however, no such tax from 1865-67 due to cropping up acute public murmuring. The Income Tax Act, 1886 was brought out to build- up licence tax. The Income Tax Act, adopted in 1922 ( IT Act)continued to be operative in post independent period too. After the Constitution took birth on January, 26^th, 1950, the said law continued to be operative with the safe guard provided in Article 277 (Savings clause) of the Constitution. The Income Tax Act was remodeled and it was passed in the House of Parliament in September, 1961 and the Indian Income Tax Act, 1961 (Income Act) thus came into effect in continuation of the previous one. It is, in fact, a tax only on income, profits or gains and not on the capital, whether original, substituted or increased. The salient features are, therefore, - (i) income tax is only a charge on income and not the capital; (ii) the method of charging tax on income and capital gains is different; (iii) in computing the taxable income of a business, profession or vocation, only the revenue expenditure and not the capital expenditure is deducted from the trading profits.

‘Tax on agricultural income’, is a subject, administered by the State Governments through the tax machineries of the State. In 1925 the Indian Taxation Enquiry Commission opined the justification of creating a measure of tax on agricultural income, but the same was not readily materialized due some obvious difficulties. The Government of India Act, 1935 as well incorporated an entry No. 41 in the Seventh Schedule of Provincial Legislative List to facilitate introduction of tax measure on ‘agricultural income’. The measure of tax on agricultural income was thus introduced, which had the consequential effect that “The Assam Agricultural Income Tax Act, 1939” (Agricultural Act) was enacted by the then provincial Legislatures of Assam and the said Act became operative from the 1^st April, 1939. After India attained the dignity of a Democratic, Republic Nation on the 26^th January, 1950, the entry No. 46 incorporated in the Seventh Schedule of the Constitution provided power to the Legislatures of the State to enact law on the ‘Taxes on agricultural income tax’. As a matter of fact, the 1939 Act was already operative and it continued to be operative by virtue of the said provision read with Article 277 of the Constitution. It is worthy to mention that within this long spell of 70 years, a number of amendments of the Act took place in consideration of the administrative needs in the interest of public service..

‘Tax on income’, as defined in clause (29) of Article 366 of the Constitution ‘includes a tax on the nature of an excess profits tax’, ‘ Agricultural income’ as defined in clause (1) of the said Article means ‘agricultural income, as defined for the purpose of the enactments relating to Indian income tax.’ The Constitution thus maintained silence so as to provide independent and categorical definition on the term ‘agricultural income’, implying thereby that, it is dependent on the Income Tax Act. The definition in the Income Tax Act, inter-alia, laid down that ‘the income that is derived from the land of agriculture’. The tax on income and the tax on agricultural income are levied on the income derived in the previous year, subject to deduction of the amount, admissible under the relevant Acts out of the total quantum of income derived.

Though the main purpose of the agricultural Act is that, it is a tax on agricultural income, but a unique deviation has been made in the matter of determination of the quantum of the agricultural income of tea. The Income derived from tea is to be bifurcated into two. That is on income of agricultural activities and that of on trade activities. The ratio thereof was specified as 60 : 40- that is, 60 percent on agricultural income and 40 percent on trade income. This principle is exclusively maintained in case of the income of the agricultural product ‘tea’ only and not on other products like paddy, pulses, wheat, sugar- cane etc. where also simultaneously the question of both agricultural and trading activities are involved. There are good numbers of tea gardens in Assam exceeding 45, 000 in numbers with 700 to 800 numbers of industrial establishments. The former produces green tea laves, while the latter finished products, the black tea. In fact, the green tea tea leaves are sold to the industrial establishments, while the black tea in the State or out of the State in the course of inter-State trade or commerce.

The sales of green tea leaves are exempted from tax under the Assam Value Added Tax Act, 2003 (VAT Act) vide entry No. 41 in the First Schedule. The quantitative production of green tea, on the other hand, is taken into account for the purpose of levy of tax on tea garden lands, with the measuring scale of production of green tea leaves in smaller tea gardens, It is note worthy to state in the connection that the Legislatures of Assam incorporated the following provisions in the Assam Taxation On Specified Lands Act, 1990 (SPL Act)with effect from the 12^th day of February, 2009

“Section 6A- Every person engaged in manufacture of tea and responsible for making any payment or discharging any liability on account of any amount purported to be the full or any part payment of sale price or consideration of purchase of green tea leaf, shall, at the time of credit to the account of or payment to the seller of such amount in cash, by cheque, by adjustment or in any manner, whatsoever, deduct tax calculated at the rate of 20 paise per kilogram and deposit the same in the State Exchequer in the same manner, as may be prescribed.” [The rate of tax was enhanced at 25 paise per Kilogram with effect from the 29^th April, 2010”]

This apparently reflect that a tax is to be payable in a direct or indirect way on the sale or purchase of green tea leaves not on advelorem basis, but on weight basis, though, in fact, the VAT Act clearly restricted it.

The measure of tax, adopted in this behalf seems to be out side the scope of the VAT law in as much as the sales and purchase of green tea leaves are exempted from sales tax in Assam. The restriction to levy of 100% tax on the income of tea, therefore, obviously created an acute set-back in the revenue generation exercise of the State in as much as 40% of tax on such income is poured to the Central Coffer in the name of income on trade activities. In fact, tea industry is one of the few limited industries of Assam. Hence, a rethinking is necessary to maintain disparity in respect of other agricultural products to restore the fiscal equilibrium. The State Government may initiate dialogue with the Central Government on this issue, if considered necessary.

The Agricultural Act continued to be operative for long 72 years provided ample power to the said tax authorities to administer the Act including the levy of tax and other allied matters. Over the head of such vested quasi-judicial power, the exclusive power of determination of the quantum of total income and bifurcation thereof for agricultural income by the income tax authorities, is obviously a double standard vision in the power exercise scenario of the Agricultural Act. It is, no doubt, an irrational and a pre-judicious projection in the matter of levy of tax on agricultural income. Rule 5 framed under the said Act provided some discretionary power to the State taxing authority for scrutiny and examination on such determination and bifurcation in such cases, when circumstances warranted so. The Supreme Court of India, however, quashed the validity of the said State rule. The State tax authorities are thus to remain cipher and to act like rubber stamps on the unitary decision of the central authorities. The quasi-judicial aspect in the agricultural Act has been nullified thereby.

The Head Offices of limited numbers of industries, like tea industries, oil industries, coal industries, jute merchants etc.of Assam are mostly located at places out side the State of Assam. The taxes on income are generally deposited by such industrial entrepreneurs in the income tax territorial jurisdiction of such Head Offices. The concerned States in which such tax income tax revenue deposits use to get share of income tax, as envisaged in Article 270(2) of the Constitution. Assam is thus deprived of such benefit even though the base of production, manufacturing and trade activities fall within the territorial jurisdiction of Assam.

The sensitive sons of the soil of Assam, therefore, urge upon the Government of Assam to consider all this vital aspects and play a pivotal role for its suitable solution at this stage keeping in mind that a spark neglected may burn the house.

AVERT RAMPANT CORRUPTION IN ASSAM CHECK POSTS

When a section of renowned and august personalities of the Indian sub-continent are on the heels to uproot corruption and are conspicuously vociferous against the social evils and impropriety, the continuance of the marathon flow of rampant corruption in the border check posts of Assam has posed to be an acute threat to the sound and healthy economy in the field of revenue generation of Assam. The trend of corruption in encouraging and accelerating the revenue drainage of the State is, undoubtedly, the social and economic crime and obviously attracts coercive measures. The border check posts of Assam were established since 1971-72 with a view to arrest the tax evasion and thereby to augment the State revenue. The check posts of the other departments, like transport, forest, excise and P.W.D. are also simultaneously functioning in a composite manner or with independent entity, having the aim and object to ensure proper revenue generation of the State. There seems to be, of late, a dearth of sincerity and lack of good will in such noble mission. The revenue generation is always incremental and certain factors are involved in such high revenue rise year after year., When, on the contrary, any acute lapse in such ardent exercise is visible for any negligence of duty or connivance of the tax machinery or collusion with the traders, it tantamount to be a deep cause of agony and a shadow of darkness surrounds the prospective dazzling revenue scenario.
Contrary to the original aims and objects, an unhealthy happening has been coming in sight through the screen of the publicity and the flushing of the news media. A sensitive citizen has the reasons to be ashamed, when a truck driver makes the innocent open expression that while coming across the other Border States, like Bihar and West Bengal etc. without any element of black money, they are victimized with illegal and unreasonable demands for such black money, while entering into the State of Assam. The earning of black money at the cost of the State Government revenue is, no doubt, very unfortunate and it is offensive and quite detrimental to the public interest.
It is appreciated that adequate measures have been taken by the taxing authorities to ensure revenue collection by way of mobilization of inner records through hi-tech exercises, but ,in fact, this is a theoretical approach and an effort to unveil the position of hide out revenue and to make recovery thereof from deep slumber under the cover of the records. The ardent necessity, what is felt, is to check and arrest the unaccounted inflow of goods and to discourage the consequential tax dodging activities on the sales. Such an endeavour seems to be legging far behind at these instant hours.
The check posts are the watch dogs to curb and arrest the evasion of tax revenue at the source, but there is no ‘Weigh bridge’ installed at the check posts primarily to ascertain the actual weight of the goods carried, which aptly differs with the covering Challan manifests in many cases. There is no broad platform in the check posts with proper and suitable man-power to unload the goods and to get proper account on the qualitative weight and value thereof. In many cases, such illegal carriage of goods uses to move scot free. The affairs of the check posts presently continues with the go as it is practice with broad-based British Ex-Premier Walford’s vision “Let the sleeping dog lie.” In last part of the 20th century and first part of this century, continuous raids to inspect, examine and to detect the tax dodging activities at the places of businesses of traders, godowns and warehouses gained the momentum and a substantial yield of revenue achieved as well. The transporters being the co-partners of such of such mal-activities, playing the pivotal role in such tax dodging episode, were, as well, not spared. There was, no doubt, high handedness in such raid exercises indulging personal gain under the shadow of some so called big banyan tree like personalities. The law of the land was very much there to apprehend such odds. Hence, the Government ought to have accepted it as a challenge and discourage the same in firm hands instead of bidding a good bye to such a fruitful and unhygienic revenue- generated programme.
The issue and utilization of the ‘Delivery Notes’, to make proper accounting of the imported goods, in fact, sometimes prove to be the farce and in practical sense, a parallel unaccounted flow of business runs without any tax liability in many cases. The Transit Passes issued to move the\goods from one State to other through the corridor of Assam amounts, on many occasions, to be a breach of trust in as much as some quantity of such goods hardly moves across the check post and are sold within the State of Assam.
The taxing authorities have been well equipped for administration of the tax laws by virtue of delegation powers, but a break of the continued system for last six decades becomes obvious, as the incumbents responsible for power exercise solely are dependable on the direction and dictation of high ups, exercising the so-called unitary power. The character and quality of quasi-judicial exercise is thus practically getting a crack.
Our concern is that the good name of the taxation department is to be restored and it should not be the subjected to criticism at any level, more particularly, the news or in the publicity media. There needs a profound review on the shortfalls of the functionaries with a designed renovation. The primary duty of the State Government is, therefore, to take note of the deficiency and to initiate action for aversion of rampant corruption at this stage, which has already polluted the healthy atmosphere.

On way to GST regime

"A march to the Goods and Services Tax Regime"
Shri Mrinal Kanti Chakrabartty, a retired tax officer of the Government of Assam, is now on the heels to publish his 15th book, namely; ‘On way to GST regime’. This book contains a chronological history on the tax measures in Assam since 1939, that is, during the British era. The present taxation laws operative in Assam also got berth in this book. The original Assam sales tax laws were dismantled from time to time and the VAT Law is now operative in Assam since 1st May, 2005. While appreciating the VAT measures in the country, Shri Chakrbartty maintained that the VAT regime has forced the consumers to shoulder a heavy burden of multiplicity tax element in each stage of sale and there had been an unprecedented price hike of the commodities, which tortured them economically. Out of his prolonged experience, he also pointed out some set-backs, faulty ways of action, in legal, practical and technical aspects in the VAT Law, operative in Assam.
According to Shri Chakrabartty, the proposed GST regime will provide fiscal relief to the consumers to a great extent, as there will be no consecutive charge of tax in each sales deal, but only the difference will be reckoned.
This Act will be a conglomeration of Central and State tax measures. A drastic change of the Constitution of India will naturally be necessary for introduction of the consolidated Central and State taxation law.
The new tax law, as Shri Chakrabartty felt, is likely to be enacted by Parliament and the Government of India (Central Government) will be the chief architect of such tax measures. The State Governments are likely to administer the State tax measures under the direction and guidance of the Central Government. He apprehends that, if it practically happens so, the economic sovereignty of the States will likely to be seized. The role of the State Governments in that case will be cipher and the States will be dependable on the Central Government in different aspects.

PROSPECTIVE IMPACT ON THE PROPOSED GST REGIME IN INDIAN SUB-CONTINENT

Sub-clause (3) of clause 100 read with entry 48 of the Government India Act, 1935 empowered the Provincial Legislatures of the British ruled India to make laws on the specified subjects. In Assam, the first tax laws were enacted 1939 on the sales of petroleum, on agricultural income and on amusement and betting. With the evaluation of time, a series of taxation laws were introduced in the post independent era. At present, as many as eight State tax laws and one Central tax laws are operative in Assam. These tax laws are- (i) on the sales and purchases of goods, the Value Added Tax or VAT, (ii) entry of goods, (iii) professions, trades, callings and employments, (iv) amusement and betting, (v) specified lands, (vi) Luxuries provided in Hotels and Lodging Houses,(vii) agricultural income, (viii) electricity and central sales. The VAT law has been operative in Assam since 1st May, 2005. It is a broad -based tax. The perimeter of the VAT is wide and each State has its own law on VAT.

The Government of India, since some couple of years has been contemplating to introduce a new tax measure in the States of the Indian sub-continent. An ardent exercise is going on to materialize the venture by introducing the Goods & Services Tax (GST). It seems to be a refined form of VAT, but it is intended to make the base more wide multifarious designed. A part from the tax on sales and purchases of goods, a number of tax measures on State and the Union tax are proposed to be merged to give birth to a unified tax law.

GST is not simply VAT plus Service tax, but it seeks a recast and renovation on VAT. GST is a tax on the goods and services with the comprehensive and continuous chain of set-off benefits from producers’ as well as service providers’ level upto the retail sellers, so as to say, the consumers’ level. It is essentially a tax on the value addition at each stage and a supplier at each stage will be eligible for set-off, through a tax credit mechanism. The GST purchased goods and services are available for set-off on the GST to be paid on the supply of the goods and services. The consumers will bear the burden of last tax (GST), charged in the supply chain only. The multiplicity of tax component is not to be occurred, which will have the consequential effect that the price hike burden to the consumers will be lesser. The illustration, given below, will make the position clear-

GST at the manufacturers’ level- (i) purchase value say, Rs. 100.00, (ii) value addition Rs. 30.00,(iii) sale value of the goods and services Rs. 130.00, (iv) tax rate 10 paise in the rupee,(v) GST(out put tax) Rs. 13.00, (vi) input tax credit Rs. 10.00, (vii) net GST (out put tax) Rs. 13.00- (input tax credit) Rs. 10.00= Rs.3.00. Unlike Rs. 13.00 in VAT, out put tax is to be charged at Rs.3.00.
GST at the whole selles’ level -(i) purchase value say, Rs. 130.00, (ii) value addition Rs. 20.00 (iii) sale value of goods and services Rs. 150.00 (iv) tax rate 10 paise in the rupee, (v) GST (out put tax) Rs. 15.00 (vi) input tax credit Rs. 13.00, (vii) net GST (out put tax) Rs. 15.00 –(input tax credit) Rs. 13.00= Rs. 2.00. Unlike Rs. 15.00in VAT, out put tax is to be charged at Rs. 2.00.
GST at the retail sellers’ level- (i) purchase value say, Rs. 150.00, (ii) value addition Rs. 10.00 (iii) sale value of goods and services Rs.10.00, (iii) sale value of goods and services at Rs. 160.00 (iv) tax rate 10 paise in the rupee, (v) GST (out put tax) Rs. 16.00 (vi) input tax credit Rs. 15.00), (vii) Net GST (out put tax) Rs. 16.00 – (input tax credit) Rs. 15.00= e. 1.00. Unlike Rs. 16.00 in VAT, out put tax is to be charged at Re.1.00.

So, unlike VAT regime, the price level is likely to go down and the consumers will be benefitted. The distinction between VAT and GST is that : (a)VAT provides multiplicity of tax at each stage of sale; (b) Payment of sale price on inclusion of the value added tax;
The GST provides that:(a)The difference of tax is payable; (b) A transparent and complete chain of set-off is maintained.

It is likely to widen the coverage of tax base and improve tax compliance. The higher generation of revenue with the lower burden of tax element to the consumers seems to be the moto of the proposed GST regime.

The Central Excise Duty is in fact, leviable at manufacturing point before removal of the goods from the manufacturing spot and such Excise Duty is to be collected and deposited, when the goods are removed from the business premises. The Service Tax is charged on the date of handing over of service or on the date of receipt of payment, whichever is earlier. The VAT, on the other hand, is to be charged at the time of sale of the goods, whether the payment is readily made or there is deferred payment. The GST will ease out such matters. The GST is to be charged on each transact.

The items of taxability in the GST system will be, as below:
(a)on the sale of goods; (b)incorporation of goods in an individual contract; (c)hiring a taxi;(d) hiring equipment; (e)lease of a premises; (f)consultation by a chartered accountant; (g)import & export of the goods; (h)) rendering of any service; an (i)) a transfer of immovable properties etc”. So, its perimeter will be wider.

The GST being chargeable on each transaction, it may also be called as the’ transaction tax’. It is likely to abolish the interpretational problems whether a particular transaction is goods or services; applicability of State or Central levy or applicability of a particular rate, as may arise. So, the GST will have a separate characteristic and its impact will be large and wide.

Unlike the tax laws on the sales or purchases of goods, the levy of tax will not be confined to the moveable properties only. It will extend to the immovable properties as well. For instance-

(i)The lease of premise is nothing but a lease of immovable goods. Actually, the dictionary meaning of the term ‘lease’ is ‘a contract by which one party lets land, property, services etc. to another for a specific time, in return for money. (ii)Levy of duty on premises, that is, on the immovable properties is presently a subject matter of the State revenue department;

Consequently, with the introduction of the GST, any such laws will naturally be irrelevant and will turn to be redundant. The salient features are discussed below:
(i)India is a federal structure of country. The State Governments and the Central Government, apart from other essential ingredients, have been empowered to undertake the economic administration within the frame work of the Constitution, subject to the conditions, restrictions and limitations imposed therein. The GST will have, therefore, mainly two components;
(a) one levied by the Centre; (b) the other levied by the States.
This dual GST model will be implemented through multiple statutes –
(a)CGST for Centre; and (b) SGST for every States.

The basic issues ,like; chargeability, definitions, taxable persons, measure of levy of tax including the voluntary provisions, basis of classification and other allied matters, will be governed by the uniform statutes, as far as practicable.
(ii) Both CGST and SGST would be applicable to all transactions of goods and services except the exempted goods and services, goods, which are to be kept outside the purview of GST. Similar will be the case in respect of the transaction, which is below the quantum limit.
(iii) The taxes paid against the CGST and the SGST are to be credited in two separate accounts. The input credit derived from the CGST is to be utilized for the Central, while likewise the SGST input derived, is to be utilized for the respective States.
(v)Cross utilization of the ITC (Input Tax Credit) between CGST and SGST is not generally permissible.
(vi) The feasible uniform procedure for collection of both CGST and SGST would be prescribed in the respective legislation for the Central and the States.
(vii)The power of administration of the CGST will rest with the Centre, while that of SGST administration with the States.
(viii)Tax return for the relevant period is to be submitted by the tax payers both to the CGST and SGST authorities.
(ix) The tax payers would be allotted a PAN Card, as a tax payer’s identification number. The GST Pan-linked system with a total 13/15 digits to be worked out in consultation with the Income Tax department, will mainly be linked with the Income tax PAN system, facilitating exchange of data and tax payer’s compliance.
(x)Assessment, enforcement, scrutiny and audit would be undertaken by the authorities, which will be engaged for collecting the tax with information sharing between the Centre and the States.

In addition to the above, the deals at the inter-State level will be termed as the Inter-State GST (IGST). The utilization of the inter-State supply of goods and services will be made under the IGST model. The ITC will be from the respective inter-State level.
‘Dual’ means - ‘two fold.’ India is a federal structured country. The Central and the State Governments have been provided with power to rule the country with the division of powers enunciated in the Constitution. In the economic scenario, particularly in relation to the levy and collection of tax, appropriate legislation is to be worked out by Parliament and the State Legislatures, as envisaged in clause (1) of Article 246 read with List I (Union List) and clause (3) of Article 246 read with List II (State List). In addition to the above clause (2) of Article 246 read with List- III (Concurrent List), the power can be exercised by the Union and the States concurrently. The Central and the State Governments are to be empowered to perform their distinctive duties in making enactments in the matter of raising revenue resources vis-a-vis guarding any possible leakage or drainage of revenue. A dual GST is a product of fiscal federalism, keeping in view, the Constitutional requirement.
The basic architecture for subsumation designed in the GST system and l the principle formulated thereof, are-
(i)Taxes or levies to be subsumed should primarily in the nature of indirect taxes, either on the supply of the goods or on the supply of services; (ii) Taxes on levies to be subsumed, should be part of the transaction chain, which commences with the import/manufacture/production of goods or provision of services at one end and the consumption of goods and services on the other; (iii)The subsumation should result in free flow of tax credit in intra-State and inter-State levels; (iv)The taxes levied and the fees, those are specially related to the supply of the goods and services, should not be subsumed under GST; (v)Revenue fairness for both Union and States individually would need to be attempted.
The basic principle of the GST being as such, the Empowered Committee recommended that the following Central Taxes, administered by the Government of India, ab-initio, are to be subsumed under the Goods and Services Tax net;
(a)Central Excise Duty; (b) Additional Excise Duty;(c) The Central Duty levied under the Medicinal and Toiletries; (d) Preparation Act;(e) Service Tax;Additional Customs Duty, commonly known as Countervailng Duty (CVD) (f) Special Additional Duty of Customs- 4% (SAD); (g)Surcharges; and (h)Cesses
Likewise, the following State taxes have been proposed to be incorporated in the GST net:
(a)VAT/Sales tax;(b) Entertainment tax (unless it is levied by the local bodies);(c) Luxury tax; (d)Taxes on lottery, betting and gambling (e) State Cesses and Surcharges in so far as they relate to supply of goods and services; and (f)Entry tax not in lieu of Octroi.
The movement of goods, occurring from one State to another, not by way of sale, but by way of stock transfer for the purpose of sale out side the State or for any manufacturing activities or for other purposes, is restricted from levy of any tax, as laid down in sub-clause (a) of clause (1) of Article 286 of the Constitution. Any levy of tax is, therefore, beyond the ambit and competence of the State Legislatures. The Central Act has exempted tax on the said stock transfer of goods subject to some conditions and restrictions with production of satisfactory evidences. The GST literature has not reflected properly as to the question taxability or otherwise of the goods to be moved from one State to another on stock transfer. However, time will say as to the modus operandi of this tax measure.
The following will be excluded in the GST tax net :
(a) Direct Taxes; (b) Property Taxes; (c) Stamp Duties; (d) Toll Tax; (e) Passenger Tax; (f)Road Tax; (g)Telecom(h) Licence Fee; and 9i)Tax on Electricity.
The Central Government constituted the State Empowered Committee to work out the ways and means, to examine and to prepare a road map on the proposed system of the GST, as done in the case of VAT. T is on the heels to carry out such a heavy responsibility. The Empowered Committee with the concurrence of the Central Government like wise constituted a Joint Working Committee Group with a view to study the models of the GST in the global sphere, if necessary, to provide alternative suggestions, keeping in view India’s fiscal position. The suggestions of the Joint Working Group will include as well the following :
(i)The GST is to be a revenue- fair with sufficient growth of revenue to the Centre and the States. Interest of Special Category, North East States and the Union Territories have to receive due consideration. (II)A study by the group will be necessary in which power of levy, collection and appropriation of revenue by the Centre and State should be categorically mentioned besides providing the manner with the pros and cons of the various identical models. (III)There should not be any double taxation. (IV)The problems faced in the matter of inter-State transactions and revenue loss should have a suitable end. (V)A suitable solution over the question of exempted, non-VAT items, petroleum products and alcohol might be well treated by exclusion from the GST regime. (VI)The trade, industry, agriculture and the consumers’ interest are well guarded and the Central-State relationship is maintained cordially.
. The present multifarious system of tax has practically crippled the economy of the country. A commodity has to suffer various incidence of tax right from the production to reach the consumers’ hands by this way or that. The tax levied in different aspect is approximately about 27.5%. In GST regime, such total incidence of tax is likely to be reduced and to come down within approximate perimeter of 20%. Obviously, a reduction of the quantum of tax levy is expected.

High rate of tax generally paves the way for mounting evasion of taxes. A trader develops the mentality to escape from heavy burden of tax and adopts various fraudulent means to evade taxes. This is long grown phenomenon of the traders if reduced considerably, the trend and tendency of evasion of tax, is likely to be minimised to a considerable extent. However, it can not be said categorically that such a modus- operandi will take a final good-bye. It can, however, be well expected that the revenue generation will be accelerated to a considerable extent.

Globalization of economy is now one of the min themes of the world nations. Any good tax policy aims at social and cultural up-liftment, global economic realities, administrative efficiency, technological development, economic growth, stability, equity, to ensure welfare of the economically weaker and the vulnerable sections of population. GST will cut the cascading effect and thus can benefit not only to the consumers but also to the industry at large.The intentions of the global nations are as well to make out an all round competition at the global levels and it is not necessarily on the regional or country basis. All are eager to adopt common tax system, uniforms and simple, as well a common marketing platform. There is a common thought that the lower rate of tax will yield higher revenue, as the tax dodging episode is likely to be reduced, when there is lesser burden of tax.

The GST law will be an amalgamation of the measure of tax by the State, the Centre and also at the inter-State level. The powers and functions will as well be divisible amongst the three. The respective provisions of law and the power exercise, it is believed, will maintain their own entity. A question naturally crops up whether Parliament will be vested with the power to make enactment of the GST law or the State Legislature will be responsible for enactment of the portion of law relating to the respective States. That is a policy matter and no comment at this stage seems necessary. However, apprehension is there that the States may lose their autonomy and will be forced to be dependent on the centre in all spheres.
The literature on the GST provided an idea that there will be a drastic change in the Central and State tax structure. Such change will only be possible, when bases are prepared in the Constitution. At present the power scenario of the Centre and States are divisible in the Seventh Schedule of the Constitution. If any unified law is enacted, the Constitutional set up will require amendment. An amendment of the Constitution will thus be imperative and the Seventh Schedule of the Constitution (Union List, State List and Concurrent List) will require renovation.

(Mrinal Kanti Chakrabartty)
“Rudra Bhawan”, Radha Govinda Barua Road, 10 Lakhimipth,Guwahati-781-024

The Asam Sahitya Sabha : Bahumukhi Achani Grahan Prahashan Swarup

‘The Asam Sahitya Sabha : Bahumukhi Achani Grahan Prahashan Swarup’, the article published
in the Janasadhran Newspaper on 17th September 2010 , written by Shri Mrinal Kanti Chakrabartty, is a part-projection of the inner happenings of the Asam Sahitya Sabha, a linguistic, literary and cultural Organization, the largest forum of the North Eastern Region of the Indian sub-continent. Actually, it has been a den of politics and no proper importance has been
given towards the desired aim and object of the Sabha. The lobby system has been getting the
momentum in this linguistic, literary and cultural Organization. The system of election of
the office bearers has gradually become a farce. The actual idealistic literary persons are
not getting berth in this secret forum. The money hunting- activities for personal gain
plays a pivotal role in this august platform and the scandalous activities are coming to the
light from time to time. There is no proper respect to the Sabha Constitution, as has been
projected. The self-designed highhandedness is getting priority, instead of following up
democratic tradition in this great reputed organization.

Here the link http://www.janasadharan.in/1/images/4.jpg