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

MYSTERIOUS WAY TO EXTRACT TAX ON GREEN TEA LEAVES

The tea garden lands of Assam have been playing a prominent role in the agricultural, industrial and commercial aspects in the State scenario. The State is blessed with the flow of incoming revenue derived out of tax on sales, tax on agricultural income, tax on specified land, apart from the land revenue, revenue on electricity duty, revenue on professions, trades, employments etc. tax. Though the Assam tea has been facing an acute competition in the global commercial market, the good name of the Assam tea is still being maintained, as a whole.
Some pertinent question in relation to the measures of tax, adopted in Assam has apparently been visible and it is necessary to make an analysis on the same.
Exemption of tax on Green tea leaves
The First Schedule of the VAT Act has specified series of goods, exempted from tax under Section 9 of the VAT Act and hence no tax is leviable on the sales of such goods made within the State of Assam. The sales of such goods made in the course of inter-State trade or commerce are as well to be treated as tax free. Entry 41 of the said Schedule laid -down that ‘Unprocessed green leaves of tea’ is exempted from tax. The ‘Tentative Commodity List of Vatable Goods’, finalized by the Empowered Committee, contained also that ‘Unprocessed green leaves of tea’ is exempted from tax under the VAT Act.
.Concept of Specified Land Act
Clause (3) of Article 246 read with entry 49 of List-II (State List) in the Constitution vested powers to the State Legislature to make law in respect of ‘Tax on Land and Building’. In exercise of the said powers, the Legislatures of Assam enacted the “Assam Taxation (On Specified Lands) Act, 1990” (Lands Act), which came into effect from the 1st January, 1990.
The preamble of the Lands Act laid down that it is a tax imposed on certain categories of land. The levy of such tax is to be made on the annual productivity of such specified lands. The specified lands includes, inter-alia, the tea garden lands and the annual productivity of the green tea leaves on weight (in Kilogram) basis is the measuring scale for the purpose of levy of tax on such tea garden lands.
In the original Act effective from the 1st January, 1990, the rate of tax was fixed at 50 paise per Kilogram. The validity of the Lands Act was challenged by a number of tea gardens and tea organizations before the Gauhati High Court and the Supreme Court of India. During the pendency of the cases, however, a Memorandum of Understanding (MOU) was signed between the Government of Assam and the various tea organizations and the rate of tax was reduced from 50 paise to 18 paise with a retrospective effect from the 1st January, 1990. The Lands Act was amended from time to time and with effect from 31st March, 1997, the tea garden lands, the aggregate area of which did not exceed four hectares, were exempted from payment of such land tax.
The numbers of tea estate in Assam and the production of green tea leaves in such tea estates, as were projected in the Statistical Hand Book of Assam, 2007 are, as below:
Year Nos. Quantity produced (in weight)
2002- 43272 43,33,27,000 Kg.
2003- 43293 43,47,59,000 Kg.
2004- 43296 43,56,49,000 Kg.
2005 - 47,41,37,000 Kg.
The numbers of tea gardens and the productivity of tea thereof must have gone to a much higher side during these long five or six years, which particular is, however, not available readily. The collection of tax under the Lands Act was ascertained from the tax department sources, which is as below :
2002-2003 – Rs. 52.93 crore
2003-2004 - Rs. 56.17 “
2004-2005- Rs. 45.29 “
2005-2006 - Rs. 52.18 “
2006-2007- Rs. 53.68 “
The revenue yield from the green tea leaves under the Lands Act seems to be not upto the mark and due taxes were not likely to have been paid by a number of tea gardens.
Some of the tea estates, the numbers of which are exhibited above, do not have any tea manufacturing units (industrial units). Those tea garden units use to make sale of the green tea leaves to the tea industrial units for manufacture and sales of black tea. The numbers of tea manufacturing units in Assam are roughly in between 750 and 800. Some tea gardens, as it could be learnt, made bifurcation or trifurcation of the original units and made the same smaller ones so as to enjoy the benefit of exemption of taxes, as provided in the amended Lands Act of 1997 effective from 31st March, 1997. A huge loss of revenue is thus being incurred annually since 1997-98.
Proposal to levy Cess on the bought- tea leaves in Assam
While presenting the Budget for the 2008-2009 in the House of Legislature of Assam on the 10th March, 2008, the Chief Minister of Assam submitted as proposal before the House for levy of Cess on the green tea leaves. The portion of the speech is reproduced hereunder:
“A large number of bought-leaf factories have come up in Assam. These bought –leaf factories purchase green leaf and manufacture tea. However, unlike established tea companies, these bought-leaf factories do not contribute any revenue to the State Exchequer. They are unable to maintain quality of tea. At present, these bought-tea factories and some established companies who manufacture tea from bought-leaf do not pay any Cess on green tea leaf purchased by them. I propose to levy Cess at therate of 20 paise per kilogram of green tea leaf purchased by them. This rate is much lower than the rate at which the established tea companies pay Cess. The established tea companies pay Cess at the rate of 32 paise per kilogram of green tea leaf in Brahmaputra Valley and 29 paise per kilogram of green tea in Barak Valley. I propose to raise a Development Fund from the revenue collected for development of small and marginal tea growers, welfare of the tea labourers in organized sector and improvement of quality of Assam tea.”
‘Cess’ means a tax or duty. A cess or duty is not generally levied on the sale or purchase of goods for which separate enactment, namely; the VAT Act is there. It is generally levied other than on the sale or purchase of goods. The Budget proposal of the Chief Minister of Assam contained that a Cess would be levied on the sale of green tea leaves at the rate of 20 paise in the rupee. The proposal did not indicate specifically the Act under which such Cess was proposed to be levied.
Tax measures under Lands Act
The Legislatures of Assam by an amendment of the Lands Act ( Assam Act IV of 2009) incorporated some provisions in the Lands Act and the same was given effect from the 12th day of February, 2009. The amendment reads as:
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 part payment of sale price or consideration for 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 20 paise per kilogram and deposit the same in the State Exchequer in such manner as may be prescribed.”
(The rate of such tax was enhanced to 25 paise per kilogram with effect from 29.04.2010.)
The said amendment provided also : (i) the ways and means for deduction of tax at source and deposit thereof and to issue a tax deduction certificate to the sellers of the green tea leaves by the purchasers; (ii) submission of return and statement of deduction of tax by the purchasers; (iii) interest for non-deduction and non deposit of the deducted tax at the rate of 1.5 paise per month; (iv) imposition of penalty for any violation of the provisions of the Lands Act and (v) institution of case in the court of law for any offence.
Levy of tax on the sales of green tea leaves- controversial
In the amendment of Lands Act, the authority of law under which such amendment was made has not been quoted. It also maintained silence as to the authority under which the tax was levied on the sale or purchase of such green tea leaves in the said Lands Act, contrary to the basic principle of levy of tax on the tea gardens lands on the productivity of green tea leaves as the measuring scale.
The question of law as has been cropped up in such exercise are discussed below :
(1) The item green tea leaf is exempted from tax, as exhibited in the First Schedule of the VAT Act. Hence, no tax is leviable on the sale or purchase of such green tea leaves under the VAT Act, which was enacted under the authority of clause (3) of Article 246 read with entry 54 of List II (State List) in the Seventh Schedule of the Constitution;
(2) No other Constitutional authority was provided to levy tax on the sale of such green tea leaves, sold by the producing tea garden to the manufacturing tea gardens;
(3) The main theme and ideology of the Lands Act is that, a tax is leviable under the Act, on the annual productivity of the green tea leaves, produced. The said Act provided no scope to levy of tax on the sale or purchase of green tea leaves, which ,in fact, are exempted from the sales tax under the VAT Act, governing the principle of levy of tax on the sale or purchase of goods in Assam ;
(4) When the aggregate area of the tea garden lands held by a person does not exceed four hectares, no tax is leviable on such lands, implying thereby that the annual productivity of green tea leaves in respect such tea garden lands, are not to be reckoned for the purpose of taxability under the said Lands Act;
(5) The new measure of tax on the sales of green tea leaves incorporated in the Lands Act from 12.02.2009 obviously created a clash and conflict with the provisions VAT Act as well as a portion of the Lands Act;
(6) The tax deduction on the weight of the green tea leaves (on the basis of kilogram) has a direct clash with the principle of levy of tax on the sale or purchase of goods, where value consideration gains the momentum;
(7) The new measure of levy of tax seems to be something unforeseen and extra-ordinary, as the newly inserted Section 6A was a measure to deduct tax at source, while liability to pay tax on such sales of green tea leaves was not given berth in the amended Lands Act;
(8) The term ‘sale’ has not been defined in the Lands Act and the basic principle of levy of tax on the sales of green tea leaves also not accommodated in the Lands Act and it seems to some extent as extra-ordinary exercise of territorial jurisdiction;
(9) The basic ingredients required for the levy of tax on the sales of green tea leaves has not been incorporated in the Lands Act;
(10) The amended Act incorporated the levy of ‘tax’ on green tea leaves is contrary to proposal of levy of ‘Cess’, as reflected in the Budget speech of the Chief Minister of Assam.
The entire matter relating to levy of tax on green tea leaves seems to be controversial and review is necessary by the Government.
Solution suggested
This zig-zag process of levy of tax may have a far-reaching ill consequence to the revenue generation of the State. Since the intention of the Legislature of the State to safe guard the revenue of the State by way of levy of tax on the green tea leaves sold to the bought-leaf factories for manufacture black tea and to make sale, therefore, the Government may consider the following suggestions for the greater interest of the revenue of the State:
(i) That, the exemption tax in respect of the aggregate area of the specified lands held by a person a person not exceeding four hectares of land, as occurred in clause (a) of Section 5 of the Lands Act, may be revoked or withdrawn;
(ii) The lands, held by a person not exceeding four hectares of land, are also to be brought under the purview of tax- net of the lands Act and the provision of the said Act has to be applied in all cases;
(iii) The liability to make payment of tax, submission of returns will rest with such tea garden land owners, as envisaged in the Lands Act and the rules, framed thereunder.
However, in order to ensure that proper payment of tax has been made by such land owners, it may made as a condition that the green tea leaves handed over to the tea manufacturing factories, such land owners are to adduce proof that the tax due to State Exchequer has been paid. In alternative, such manufacturing factories may be authorized to deduct the requisite tax, while making payment green tea leaves for manufacturing or other allied purposes. The appropriate wordings will be’ the green tea leaves placed with the tea factories for manufacture or other allied purposes instead of the words ‘sale or purchase of green tea leaves’.

(Mrinal Kanti Chakrabartty)
“ Rudra Bhawan”
R.G. Barua Road, 10- Lakhimipath, Guwahati-781024