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Professional Taxes: A Missing Link in the 'GST' Design?

The constitutional scheme in India distributes the legislative subjects amongst the Parliament and State Legislatures. The three lists appended to the Seventh Schedule of the Constitution of India effectuate this scheme by outlining the various subjects distributed between the two institutions and vesting the unidentified subjects with the Parliament. The 122nd Constitution Amendment Bill, 2014 ("Amendment Bill") introduced in the Parliament by the incumbent Government proposes to redefine this constitutional balance by providing for a new basis in so far as the existing distribution of certain existing taxes are concerned. The Amendment Bill provides for "subsuming" of various existing taxes from the respective legislative subjects into one "Goods and Service Tax" (‘GST’) and enabling, in an unprecedented manner, both Parliament and State Legislatures to legislate on the subject. The Amendment Bill provides that the various entries in the Seventh Schedule, relating to identified legislative subjects, will be omitted. This implies that the Parliament and State Legislatures will forgo some of their legislative subjects in lieu of the empowerment for enacting laws on GST. The Amendment Bill proclaims that the changes are "intended to remove cascading effect of taxes and provide for a common national market for goods and services". The Amendment Bill also defines GST as meaning "any tax on supply of goods, or services or both except taxes on the supply of alcoholic liquor for human consumption". Thus, giving due credence to the expression "any" in the proposed definition as also the proclaimed and intended design, all taxes in the nature of taxes on supply of goods or services should logically form a part of GST. The political bargain between the Central and State Governments, however, has not resulted into the translation of logic into reality. As the Amendment Bill provides, only some legislative subjects relating to levy of tax on goods or services have been sought to be subsumed in GST whereas some of the existing legislative subjects are left undisturbed. One such legislative subject which has been left out of the GST design is one provided for in Entry 60 of the "State List" in the Seventh Schedule i.e. "Taxes on professions, trades, callings and employments" ("professional taxes"). In terms of this legislative field, the State Legislatures are empowered to levy professional taxes. On a parity of reasoning and on basis of fundamental design, should professional taxes also form a part of the GST? Do these taxes also share the attributes evidenced by those taxes which are sought to be subsumed in GST? These and allied questions form the hypothesis of this paper where the idea is to examine whether professional taxes should ideally have been subsumed in the GST.