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GST notification triggers uncertainty over excise duty
October, 04th 2016

If you bought a car or any other goods over the weekend, you could legally expect a refund of the component that went to pay the excise duty on it, Finance Ministry officials confirmed after consultations with Attorney General Mukul Rohatgi.

In an unprecedented development, the powers of the Centre to collect central excise duty stood withdrawn from Friday last on all goods other than petroleum and tobacco.

This premature withdrawal is understood to be an unintended consequence of the notification by the Ministry of most provisions of the Constitutional Amendment paving the way for the roll-out of the Goods & Services Tax (GST). While the notification was made with effect from Friday, the clauses that led to the withdrawal of the powers should have been notified with effect from April 1, 2017 — the date from which the GST will become payable instead of the excise duties and a slew of other indirect taxes.

Clarification, if needed
A clarification over the issue, and any amendments, if needed, would be issued on Tuesday, although the Law Department had found no ‘infirmity’, or uncertainty in the notification or any need for amendments to it, Revenue Secretary Hasmukh Adhia said on Twitter on Monday.

On Monday, ministry officials sought legal solutions to the unintended consequences of the notification, which was issued in order to be GST-ready as desired by Prime Minister Narendra Modi.

An SOS was sent to Mr. Rohatgi, who is learnt to have advised the Finance Minister Arun Jaitley and Mr. Adhia that there is no provision under which a retrospective clarification reversing the errors could be made by the Centre. “Those powers are only with Parliament,” a source present at the meetings said. “Even a clarification under a clause that allows the Ministry to correct errors prospectively will be extremely vulnerable to Public Interest Litigations and refunds of taxes already paid and collected could be legitimately sought,” he said.

Signalling that interpretation of the clauses was at the core of the debate, a Ministry official said: “The Centre and States continue to enjoy current powers to collect excise duties and Value Added Tax till September 15, 2017 under Clause 19 in the notification... the Excise Act has not been repealed yet.”

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