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Why does introduction of GST require a Constitutional Amendment?

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Question : Why does introduction of GST require a Constitutional Amendment?

 Answer :  The Constitution provides for delineation of power to tax between the Center and States. While the Center is empowered to tax services and goods upto the production stage, the States have the power to tax sale of goods. The States do not have the powers to levy a tax on supply of services while the Center does not have power to levy tax on the sale of goods. Thus, the Constitution does not vest express power either in the Central or State Government to levy a tax on the ‘supply of goods and services’. Moreover, the Constitution also does not empower the States to impose tax on imports. Therefore, it is essential to have Constitutional Amendments for empowering the Center to levy tax on sale of goods and States for levy of service tax and tax on imports and other consequential issues.

               As part of the exercise on Constitutional Amendment, there would be a special attention to the formulation of a mechanism for upholding the need for a harmonious structure for GST along with the concern for the powers of the Center and the States in a federal structure.

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