Nearly four years after Goods and Services Tax (GST) came into force in the country, the State government has notified that the authorities concerned will continue to exercise the powers and discharge functions as per the provisions of five Acts that were subsumed when the tax regime came into force on July 1, 2017.
A notification from the Finance Department on March 15 stated that the “notification shall be deemed to have come into effect from July 1, 2017”.
The notification has been issued under Section 174 of the Karnataka Goods and Services Tax Act, 2017, and Section 24 of the Karnataka General Clauses Act, 1899. Specifying a list of authorities, the notification stated that they are deemed to have continued to exercise the same powers and discharge the functions authorised under the repealed Acts.
“The notification became necessary since a member of the Karnataka Appellate Tribunal (KAT) pointed to the lacunae in a recent order. Without it, several appeals and reassessments done under the now-repealed Acts before GST was implemented would come under cloud. These have ramifications of several hundreds of crores to the State exchequer,” a source in the department said.
The Acts that were subsumed when uniform GST was implemented on July 1, 2017, were the Karnataka Value Added Tax Act, 2003; the Karnataka Tax on Luxuries Act, 1979; the Karnataka Entertainment Tax Act, 1958; the Karnataka Tax on Entry of Goods Act, 1979; and the Karnataka Betting Tax Act, 1932
The issue came into focus in October 2020, in a case pertaining to DEN Network, a multi-system operator which had contested the tax slapped under the Karnataka Value Added Tax Act on the collection of activation charges for set-top boxes.
In a split order at the KAT, one of the two members hearing the case had disagreed with the State representatives that it was automatic that these authorities would derive powers for assessments after GST came into force.
The member pointed out that the government had not exercised powers under Section 174 of the KGST Act in the official gazette, specifying the competent authorities to exercise functions of reassessment and appeal. In the absence of such a notification, no authority or officer would be legally competent to carry out the functions in Section 174(1) of the SGST Act, 2017, read with the relevant provisions of the repealed KVAT Act, 2003, stated the order.
Pointing to earlier Supreme Court orders on such a matters, and also on the Central General Clauses Act, 1897, the order stated that there was nothing in Karnataka comparable to the Maharashtra GST (Amendment, Validation and Savings) Act, 2016, to “save the provisions of repealed Acts” or anywhere in the country. The order did not agree with the State’s contention, which pointed to several High Court judgments on similar matters.
Meanwhile, when the opinion of a senior officer in the Commercial Taxes Department was sought on the retrospective nature of the executive order, he clarified, “The transition provisions are already there in the Act, and the notification is in pursuant with the provisions.” He added, “There was some confusion prevailing and hence the notification was given with retrospective effect.” The officer said that this was an explanatory clarification to the existing transition provision, which is already there in the Karnataka Goods and Service Tax Act.
