Whenever we discuss any law in India—especially tax laws—it is essential to begin at the very foundation: the Constitution of India. No law, including the Goods and Services Act (GST) can exist independently of the Constitution. Every statute, rule, or regulation must trace its authority back to it.
This is why constitutional validity is not a theoretical concept but a practical necessity. If a law enacted by Parliament or a State Legislature goes beyond the limits prescribed by the Constitution, it is treated as ultra vires—meaning, in the eyes of law, it never validly existed. Such laws are liable to be struck down by constitutional courts.
While individuals cannot themselves decide the validity of a law, courts act as the final arbiters. The principle, however, remains clear: every statute must operate within the four corners of the Constitution. Any excess must be curtailed.
The Hierarchy of Tax Laws: What Truly Constitutes “Law”?
When we speak of tax law, we often refer collectively to a range of instruments—Acts, Rules, Notifications, Circulars, FAQs, Press Releases, and Trade Notices. However, not all of these enjoy the same legal status.
Understanding this hierarchy is crucial.
The Act (Statute)
The Act is the primary law enacted by the Legislature. It must strictly conform to the Constitution. In the GST regime, the CGST Act, SGST Acts, and IGST Act derive their authority from constitutional amendments.
Rules
Rules are framed by the Executive under powers delegated by the Act. They:
- Must remain within the scope of the Act
- Cannot override the Act
- Must also conform to the Constitution
Rules operate on a lower pedestal than statutes.
Notifications
Notifications are also issued by the Executive. Though binding, they:
- Cannot travel beyond the Act or the Rules
- Do not enjoy the same status as statutes
Still, taxpayers are obligated to follow valid notifications.
Circulars
Circulars are issued under statutory authority, but their purpose is administrative guidance.
- They are binding on departmental officers
- They are not binding on taxpayers
Acts, Rules, and Notifications bind everyone. Circulars bind only the tax administration.
Press Releases, FAQs, Educational Guides
These include:
- Press releases issued after GST Council meetings
- FAQs and educational material
- Social media communications by the department
These do not have any binding force, either on taxpayers or the department. They are purely informational and cannot be relied upon for legal interpretation—something the department itself repeatedly clarifies through disclaimers.
Scope of Discussion: GST on the Constitutional Touchstone
This discussion does not aim to analyse individual provisions of the GST Act or Rules. Instead, the focus here is constitutional:
- How did GST come into existence?
- What constitutional changes enabled it?
- Does GST operate within the constitutional framework?
In short, this is the story of the birth of GST.
The Constitutional Birth of GST
GST was made possible by the 101st Constitutional Amendment Act, 2016. This amendment fundamentally altered India’s indirect tax landscape by reallocating taxing powers between the Centre and the States.
At the heart of all taxation lies Article 265 of the Constitution, which states:
“No tax shall be levied or collected except by authority of law.”
This provision is far more powerful than it appears at first glance.
Levy and Collection: Two Indispensable Components
Article 265 does not merely speak of levy; it also mandates lawful collection. Both must be expressly authorised by statute.
What is “Levy”?
The Supreme Court, notably in the Godfrey Phillips case, explained that taxation consists of:
- Object of taxation – what is being taxed
- Event of taxation – the trigger that attracts tax
For example, under VAT:
- Object: Goods
- Event: Sale or purchase of goods
Thus, levy refers to the taxable event—upon the occurrence (or non-occurrence) of which tax liability arises.
What is “Collection”?
Collection refers to the machinery provisions:
- Who pays the tax?
- When is it paid?
- How is it paid?
- Through what mechanism is it enforced?
A tax law that prescribes levy without providing a collection mechanism is incomplete and unenforceable. Courts have consistently held that machinery provisions are as essential as charging provisions.
For instance:
- Customs duty is collected on each import transaction
- GST is generally collected through periodic returns
- Capital gains tax requires a mechanism to compute gains and identify the liable person
Without these details, the levy itself collapses.
A Classic Analogy: Tax Collector vs. Thug
One judge famously remarked that the only difference between a tax collector and a thug is authority of law.
Both extract money compulsorily. But while a thug acts outside the law, a tax collector acts because the law empowers him to do so. That legal authority—conferred by a valid statute—is what legitimises taxation.
Constitutional Allocation of Taxing Powers
Finally, the power to levy and collect taxes is constitutionally distributed between:
- Parliament, and
- State Legislatures
GST represents a unique model of concurrent taxing power, constitutionally sanctioned through the 101st Amendment.
Conclusion
GST is not merely a tax reform—it is a constitutional innovation. Its validity, structure, and operation are deeply rooted in constitutional principles, especially Article 265.
Understanding GST without understanding its constitutional foundation is like reading a statute without knowing its authority. Every tax practitioner, therefore, must appreciate GST not just as a law—but as a constitutional construct.
Leave a Reply