There is enough literature on the pluses and minuses of GST- this article doesn’t want to add to the literature. Instead, it shall focus on bidding adieu to the Central Excise Act, Finance Act 1994 and VAT Acts of State Governments. Though these Acts will continue to be used for goods and services that have not been subsumed under GST (petroleum products) and for the existing cases pending, they will no longer be used on a day to day basis from July 1st.
Central Excise Act
The Central Excise Act is the oldest of the lot-it has lived for 73 years. When introduced, it was called the Central Excise and Salt Act. It introduced us to the concept of manufacture and got us used to an extremely detailed Tariff list that seemed very particular on taxing different types of the same product differently- this is something that the GST Act has picked up effortlessly. We were told that manufacture means a new product coming into existence and that Excise Duty gets attracted the moment the goods leave the factory gate. Credits were permitted through what was called Modified Value Added Tax (MODVAT) which later rechristened itself to Cenvat Credit. It also decided to introduce the concept of valuation of manufactured goods. Each one of these areas was disputed all the way till the Supreme Court and litigation on some areas will continue well into the GST era.
Service tax was unleashed upon the nation in 1994. It has had a tumultuous 23 years. This is probably one of the few laws in the country that does not have an Act against its name even after two decades. When it was introduced, a service was not defined and a threshold exemption limit was not given. Having not defined a service, the tax department had to face litigation from mandap keepers and retailers. A threshold exemption limit in 1994 would have ensured that the exemption limit under GST would have been at least Rs 40 lakhs- a figure close to what the Arvind Subramaniam Committee recommended.
For a long time since Independence, State Governments had their own Sales Tax Acts. Haryana took the lead in introducing VAT in 2003- over the years all other States followed suit. VAT introduced us to the concept of transfer of title and later some Governments introduced e-way bills. VAT also gave us one of the most controversial areas of taxation- taxing works contracts. It began in 1959 when the Supreme Court in State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd., 1959 SCR 379 held that in a building contract which was one and entirely indivisible, there was no sale of goods and it was not within the competence of the State Provincial Legislature to impose a tax on the supply of materials used in such a contract, treating it as a sale. Decades later, the Supreme Court would reiterate the decision in Kone Elevators. GST has fixed the problem of Works Contracts by classifying it as a supply of services.
Each of the above Acts has served their purpose in some manner or the other and taxpayers will certainly miss them. However, since the GST law has modeled itself on these laws to a large extent, we may not miss most of the issues that they engaged the taxpayer, department and courts with.