Sunday, September 18, 2016

Gautam Bhatia's "Offend, Shock or Disturb" - A Review

Guest Post by Adithya Reddy
Gautam Bhatia’s book on free speech is a first of its kind work on any Part III right. It will be indispensable reading for any future research on the constitutional history of free speech, as also on the contemporary status of this right in the country in comparison to other common law jurisdictions. What Bhatia seeks to do in this book, however, is much more than provide an exhaustive or even critical work on legal developments in free speech jurisprudence. He discusses the philosophy of free speech in some detail. He does so not through a single thread of argument or theory but by offering snippets from the views of various philosophers. Some of these views are used to buttress his own arguments while others help in explaining philosophical underpinnings of hard facts in case law.
Right at the beginning of the book he attempts to offer justification for the need to understand the philosophy of this freedom. In choosing the example of the Sakal Papers case to do this, he skips discussion on the more fundamental aspects of free speech philosophy. Sakal Papers case and his entire discussion of the “meaning of freedom” centres around the philosophy of market/ ‘background’ regulation as a means of regulating free speech. This, just like his detailed discussions on whether speech can be restricted through prior restraint or what should be the content of free speech, is secondary to a larger philosophical question - articulated by Professor Tom Nagel in his Dewey Lecture at the Harvard Law School. The question is whether a rule (in this case the protection of autonomy to express oneself) should be followed only for the sake of its adherence or because of the consequences of the failure to do so. While discussing John Stuart Mill, Bhatia acknowledges the hazards of a purely consequentialist justification for free speech. But Bhatia’s discussion of alternatives including Thomas Scanlon’s theory of autonomy, Dworkin’s endorsement theory or Habermas’s self-legislation, is not satisfactory. These views, as mentioned earlier, are brought out only in the form of snippets and do not help Bhatia build any cogent argument. Bhatia acknowledges that many of these anti-consequentialist alternatives have their origins in Kant, without realising that in Kantian philosophy dichotomies such as those highlighted in the book (for example, between public morality and individual autonomy) blur to such an extent that (while criticising Dworkin) the Legal Positivist Mathew Kramer misleadingly points to the “manipulability of the Kantian ideal”.[1] 
While these shortcomings can justifiably be overlooked since the book is not an exclusively philosophical work, Bhatia’s attempt to weave a bit of his own philosophy on ‘constitutional morality’ in a couple of chapters is the book’s weakest part. In his chapter on obscenity, Bhatia concludes that morality as considered by Indian courts in various judgments does not offer satisfactory basis for restricting free speech. Therefore, he proposes, on the lines of Dworkin and many other writers, that the morality that the courts should use to guide themselves in restricting free speech should be ‘Constitutional morality’. According to Bhatia, constitutional morality is morality that is located within the constitution as opposed to morality reflected by perceived social standards or the individual morality of the judge concerned. Therefore, for Bhatia, equality being such a fundamental principle of our constitution should offer a valid basis for our courts to determine the extent of any restriction. The first problem with this postulation is that it requires reading of one part of the constitution in the light of another, even if the latter was not meant to be of relevance to the former. Taking inspiration from American feminists and the Canadian decision of R. V. Butler, he postulates that the equality principle could be a legitimate tool for interpreting ‘decency & morality’ in Article 19(2) to restrict pornography since it has the effect of “subordination and silencing of women”.    The effect of such a reading may be quite drastic. It would mean that while some obscene material could be restricted on the ground of perpetuating gender bias, material with far greater degree of obscenity will escape restriction if it carries no offence to the principle of equality or any other principle ‘located within the constitution’.
Bhatia’s juxtaposition of this theory of constitutional morality in the context of hate speech (following Dworkin’s pupil and critic Jeremy Waldron) is far more problematic. Holding that restriction on hate speech should be viewed as a means of ensuring inclusiveness also means that hate speech is permissible against the mainstream and restriction should be independent of the level of hate involved. In the Indian context the definition of marginal groups and groups that require ‘inclusive’ treatment can be deeply controversial. In at least a couple of places Bhatia hints that this approach could have a caste dimension.
Neither Dworkin nor Dr. Ambedkar[2], while laying down their versions of constitutional morality, required such morality to be located in any individual principle located in the Constitution. Constitutional morality is about reading the Constitution as a whole in the light of the historicity of its founding principles. It can be nobody’s case that any provision of the Constitution appeared out of thin air or even from the pure intellect of its founding fathers. Justice Vivian Bose calls the right under Art 14 “a way of life, rather than a precise rule of law”.[3] If that is so, would it not be necessary to consider when and how such a principle- gender equality, in the case of Bhatia’s example- became a part of Indian way of life? It is fairly settled that Indian consciousness on gender justice arose in the wake of the Bengali renaissance, which was essentially a conservative movement rather than a liberal one. If Raja Ram Mohan Roy relied on the rights of ancient Hindu women[4] to demand equal share of property for women, would similar ancient principles not be relevant today if the Supreme Court were to understand equality and gender justice? In fact, Dworkin’s version of constitutional morality in the American context requires precisely such a reading of the Constitution. He says that the restriction on allowing judges to use their own morality in interpreting the Constitution should be “the moral reading…that fits the broad story of America’s historical record”.[5] His example is even more telling –“Even a judge who believes that abstract justice requires economic equality cannot interpret the equal protection clause as making…collective ownership of productive measure, a constitutional requirement because that interpretation simply does not fit American history or practice.” Therefore, constitutional morality is not about reading one facet of the Constitution in light of another merely because both are located in the same text but by reading each facet through its own morality. Viewed in this context, one should not feel so much indignation, like Bhatia does, at the Supreme Court’s view in Rangarajan’s case that speech should be tempered by concepts such as “Dharam” or the principles of “Thirukkural”.
Bhatia’s views on equality as a guide for restricting free speech also exposes incoherence in his philosophical analysis. After criticizing Ranjit Udeshi’s paternalistic view of morality using Dworkin’s theory of endorsement, he relies on a school of thought termed by Dworkin as the “strongest new attack on freedom of speech”[6] to define morality. As mentioned earlier Bhatia believes that the American feminist intellectual movement against pornography offers a reasonable example of equality being used to restrict free speech. Dworkin was the strongest critic of the works of Catharine Mackinnon and Andrea Dworkin which advocated this approach.  Bhatia should not have skirted this debate.
Some of Bhatia’s other individual views appear to be ideological and are not adequately rationalized. For instance, he offers no major justification for placing commercial speech on a lower pedestal under Art 19(1)(a) except that Indian circumstances don't warrant wholesale importation of “American Jurisprudence and Reasoning on Commercial speech”. Rather than getting lost in the byways of argumentation, Bhatia should have focused efforts on delving deeper into the philosophical positions of the several writers he attempts to survey.
(Adithya Reddy is a lawyer practicing before the High Court of Madras)

[1] See M. Kramer, In the Realm of Legal and Moral Philosophy: Critical Encounters, pg. 67. It is however wrong to to call the Kantian idealmanipulable. To understand Kants views on autonomy and freedom, one must understand all the complex preconditions he envisages for their realand rationalexercise. For a good idea of these preconditions see John Rawls, Kantian Constructivism in Moral Theory, The Journal of Philosophy, Vol. 77, No. 9, 515
[3] Bidi Supply Co V. UOI, AIR 1956 SC 479
[4] Rammohun Roy (Raja), Brief Remarks regarding Modern Encroachments on the Ancient Rights of Females, According to the Hindoo Law of Inheritance, 1822.  
[6] R. Dworkin, A New Map of Censorship, Index on Censorship, Vol 23 1994.

Sunday, September 11, 2016

Australian Correspondence: Lessons for ‘Trade and Commerce’ in India from Cole v Whitfield

As Vikram has previously noted, Part XIII of the Indian Constitution (regarding trade, commerce and intercourse within India) has once again arisen for interpretation. These provisions draw upon (but are not precisely equivalent to) section 92 of the Australian Constitution, which reads as follows:
On the imposition of uniform duties of customs, trade, commerce, and intercourse among the States, whether by means of internal carriage or ocean navigation, shall be absolutely free.

But notwithstanding anything in this Constitution, goods imported before the imposition of uniform duties of customs into any State, or into any Colony which, whilst the goods remain therein, becomes a State, shall, on thence passing into another State within two years after the imposition of such duties, be liable to any duty chargeable on the importation of such goods into the Commonwealth, less any duty paid in respect of the goods on their importation.

The brevity of the clause belies the heat and contention that has accompanied its interpretation. At his retirement in 1952, Chief Justice John Latham (himself a deeply conservative figure and former Opposition Leader) declared (in light of the trouble and controversy that the section had caused lawyers and judges alike) that '[w]hen I die, s. 92 will be found written on my heart': (1952) 85 CLR ix. In the same year, Geoffrey Sawer observed that s 92 had ‘caused more differences of judicial opinion and greater conflict between decisions than any other provision of the Constitution’ (cited in Buck v Bavone (1976) 135 CLR 110) – arising, in large part, from the charge that the section had been employed to frustrate attempts at economic regulation in Australia (by federal and state governments alike), serving as ‘the bulwark of private enterprise’ and an impediment to socialist reforms.

That is to say, Australia’s equivalent to article 301 of the Indian Constitution was both interpreted more broadly than article 301 itself (with s 92 at one stage afforded the de facto status of an ‘individual right’, rather than a mere constraint upon particular exercises of state power) and was, in large part, not subject to the constraints imposed by articles 302 and 304. There are hence differences both in terms of text and political climate (with the latter contributing to the ‘individual rights’ theory of the clause employed in mid-20th century Australia), both of which must be given substantial regard in any attempt to employ Australian caselaw or Australian understandings of the guarantee to its Indian equivalent. (Vikram has previously criticised over-reliance on Australian cases in this regard. As flattering as it was for me to arrive at NLSIU and meet students who were more familiar with Australian caselaw than their counterparts in Sydney might have been, there are definite limits to comparativism in this regard.)

In recent decades, a relative ceasefire has prevailed in Australia regarding section 92 after decades of contention (albeit with some continued controversy). This owes, in large part, to the High Court of Australia’s unanimous decision[1] in Cole v Whitfield (1988) 165 CLR 360. This post briefly examines the potential salience of the High Court’s decision in Cole v Whitfield to the interpretation of Part XIII, in terms of methodology and substance.

Cole v Whitfield concerned a challenge to a clause of the Sea Fisheries Regulations 1962 (Tasmania) prohibiting the taking or possession of undersized fish. The respondents were charged (in Tasmania) with the possession of undersized crayfish imported from South Australia. The Court noted (at 384-385) that ‘judicial exegesis of [s 92] has yielded neither clarity or meaning nor certainty of operation’, despite approximately 140 decisions of the High Court and Privy Council on its interpretation. In reconsidering its approach, the High Court had regard (exceptionally and unusually, from an Australian standpoint) to the history of the drafting of the section, including the political and economic climate at the time of Australia’s Federation, late-19th political divides over ‘protectionism’ between the Australian colonies, and debates at the Constitutional Conventions (at 385-391). The Court’s conclusion (at 391) as to the purpose of the section – ‘to create a free trade area throughout [Australia] and to deny to [the Central government] and States alike a power to prevent or obstruct the free movement of people, goods and communications across State boundaries’ – is presented both as the product of this political and drafting history and as justification for departure from the failed interpretive models of the past.

The eventual model arrived at – which may be summarised (as at 400) as the prohibition of ‘interstate border duties and other burdens of a discriminatory kind’ – may appear relatively simple, but amounted to a substantial departure from eighty years’ worth of controversy, discarding failed models of the section as a guarantee of individual rights or by reference to the ‘criterion of operation’ of laws impugned.

What lessons can be learned from the Australian experience? First, method. The unanimity of the justices was matched, to an unusual degree, by unanimity among the States and Central government (appearing as interveners in the hearing), whose Solicitors-General ‘grasped the nettle and decided to present a united front’ in seeking a new approach.[2] The decision itself drew upon both existing disenchantment with orthodoxy (or the lack of any accepted interpretation) and upon scholarly critiques, particularly those of Michael Coper (who appeared as junior counsel for NSW during Cole v Whitfield). Within the relatively staid, traditionalist environment of Australian constitutional law, Cole v Whitfield represents something of a revolution; it is telling (and instructive if any similar, lasting shift is sought in India) that the revolution occurred amid relative consensus as to the undesirability of the existing model, and was able to command and draw upon historical and legal scholarship. Cole v Whitfield hence both prefigured an end to partisan contestation over the meaning of the section and grew from a consensus among governments of all ideological stripes that something must be done. India’s ‘jungle of jurisprudence’ concerning Part XIII may ultimately be susceptible only to a similar moment of consensus.

In terms of the outcome reached, I emphasise, again, the textual differences between the Australian and Indian clauses (despite their genealogical relationship). This difference is relevant both insofar as the unique restrictions upon article 301 in the Indian context ought to lead to different results and in that the words of section 92 and Part XIII are (as the High Court emphasised in Cole v Whitfield) the results of particular historical and political contexts. If nothing else, the Indian Supreme Court may, in considering Cole v Whitfield (and its emphasis upon historical context), judge that the Australian provision is the product of unique Australian conditions and that precedents emerging from that context should be weighed in light of the very different political and historical exigencies prevailing in India.

The revolution in Australian constitutional law represented by Cole v Whitfield should not, however, prove effective solely within Australia, just as prior Australian decisions were not restricted in their influence to this nation. To the extent that prior Australian orthodoxies (and efforts to evade those orthodoxies, including the notion of ‘compensatory tax’) have been taken into account by the Supreme Court – as in Automobile Transport (Rajasthan) Ltd v State of Rajasthan, in which the Court cited and drew upon Australian caselaw even while cautioning as to the limits of comparative experience – the Supreme Court must reckon to the extent to which its precedents have been shaped by understandings of section 92 that no longer hold true even in that section’s birthplace.

[1] Unanimous judgments of all seven judges of the High Court are relatively rare: see e.g. Lynch and Williams (2015).
[2] Michael Coper, ‘Cole v Whitfield’ in Blackshield et al, The Oxford Companion to the High Court of Australia (2003) 108.

Friday, September 09, 2016

Throttling Net Neutrality: A Fast Lane to Success?

Guest Post by Ashwin Murthy

Net neutrality in its most basic understanding is the principle that Internet Service Providers (ISPs) and the Government regulating the Internet must treat all data of the Internet the same. In a situation however where these bodies can increase the productivity of the provision of Internet to the consumer by discriminating between different sites and their data packets, the question arises as to whether this too would be against the principle of net neutrality and thus should be rendered unviable. Perhaps the clearest example of the same would be slowing down certain sites in exchange for speeding up other sites, a process known as throttling and fast-laning. Each site is essentially a collection of data packets (packets of information transmitted via Internet). By distributing data packets of different sites at different speeds, a level of optimisation can be reached that cannot be provided by distributing the data packets of each site at the same speed. Thus more data intensive sites could be given priority over less consuming sites – multimedia sites over text-based sites is the simplest form of distinction to understand. This could be extended even further, where ISPs divide which sites to speed up, thus allowing the consumer to choose which is most beneficial for their personal use. In the Indian context, this could be understood in the example where Airtel would ‘speed up’ all multimedia sites (YouTube, Vimeo, Netflix, etc.) and ‘slow down’ all other sites while BSNL would do the same with news sites (The Hindu, Times of India, Al Jazeera, etc.) and so on.

At first glance, this system seems entirely advantageous to the consumer, allowing a choice in ISP catered to one’s needs and is not explicitly against the definition of net neutrality given by TRAI (after phenomenal participation of activists) in its Prohibition of Discriminatory Tariffs For Data Services Regulations, 2016 (or rather lack of a definition as pointed out by Rajeev Chandrasekhar in his letter to TRAI). This definition merely speaks of differential pricing and tariffs based on content of the sites and not differential speeds. However, the spirit of the Regulations, and net neutrality as a principle, is against such measures of differential speeds in provision of data packets and speed allotted to different websites, a point which TRAI Chairman RS Sharma brought out in his interview with The Wire. Further, the Internet Freedom Foundation (IFF), a group dedicated to working on and protecting network neutrality in India, provided a clearer definition of net neutrality, which is against this measure proposed. It could be argued that abandoning net neutrality in such a scenario is beneficial, however as clearly elucidated by an article by the Indian Express and an article by Save The Internet, net neutrality is a necessity for the Internet to be beneficial for its consumers. Net neutrality has always been a core principle upon which the Internet was created, a point which Web creator Tim Berners-Lee along with the Professors Barbara van Schewick, and Larry Lessig brought out in their open letter to European citizens, and such fast lanes and throttling requires discrimination based on the content of the data packets which is against the principle of net neutrality. TRAI through its regulations has made it clear that it is in fact in support of net neutrality, and thus such a measure is against Governmental policy and rules. The current legal position on net neutrality is rather lacking, restricted to the Regulations made by TRAI, however it could extend far beyond this rudimentary definition.

Furthermore, while this system may appear to be beneficial to the customers, it comes with its own share of problems. When delineating that multimedia sites would be boosted by Airtel, there must be a metric for determining what sites would constitute multimedia sites. In the current context of the Internet, such lines are blurred to the point of non-existence. News channels all contain multitudes of videos while many video sharing sites use large quantities of text in their content, preventing a metric to be easily created. Allowing ISPs, or even the Government, to determine this metric creates a specific mould based on existing, already successful sites. All multimedia sites would have to resemble YouTube or Netflix, creating a lack of diversity available to the consumer and a monopolization of these original already powerful sites that create the mould. New players to the market would be at a substantial disadvantage, having to conform to these moulds and thus would have to compete directly against their already established, bigger competitors, providing the same content to an already saturated consumer looking for something new.

This specific topic of throttling and fast-lanes will be taken up by the Government and the Department of Telecommunications, however there has been no mention of deadlines or time periods within which one could expect change. Organisations such as IFF are pursuing the issue and striving for complete net neutrality, however this leads to the question of whether such an absolute net neutrality is in fact beneficial. Considering that net neutrality may entail certain suboptimal procedures and measures, it could be argued that compromises could be worked out to reach a more efficient version of what we possess today. It is easy to perceive such a measure as positive and beneficial to the consumers; similar debates revolved around Facebook’s Free Basics and where, among other things, it was questioned whether net neutrality was of a higher value than providing free internet to millions. However, it must be realised that disposing of net neutrality, apart from losing its immense advantages, also disposes with a fundamental part of why the Internet is what it is – a space for freedom and creativity, a zone for innovation and expression. Throttling is just an example of abandoning net neutrality, however the scope extends far beyond, all in the name of ‘optimisation’ and better performance and delivery of service. This choice between the two is something that the government and citizens must take into account – whether it is better to sacrifice certain principles that should be held as inviolable and paramount in the aims of a high level of optimisation and productivity or to uphold these principles and settle with a perhaps less oiled machine, a machine that does the task yet does not attain its full potential.

Of course, this question isn’t limited to solely net neutrality and the Internet. The Government must make this decision almost on a daily basis. Reservations, pensions, subsidisations – these are all trade-offs between productivity and principles. It is however the prerogative of the Government to uphold these principles, an ideology the Constitution can be seen to maintain, particularly in the Articles 38 and 39. Striving to minimize inequalities, ensuring that material resources of the community are distributed to the common good of all citizens – these are Constitutional provisions that highlight this internal struggle between the two, deciding in favour of principles. It is the Government who creates the principles for the rest of the people to interpret and follow – forsaking equality for higher efficiency is exactly what the government should prevent from happening. The question as to what the Government actually does with respect to throttling as well as other such decisions between principles and productivity shall only be answered in the future, however the power of the people must not be forgotten, particularly in the light of the TRAI Regulations that were spearheaded by citizen participation. It is now as much our prerogative as it is the Government’s to ensure that these principles are upheld and not discarded for promises of productivity.

Wednesday, August 24, 2016

GST and Tax Competition

In the last post on GST, Adithya Reddy highlighted some speeches by members of the Constituent Assembly. Two of those are germane to our present discussion. One is by Mr. Mahavir Tyagi: “Because there is no ceiling limit on this sales tax, they can go on raising the tax …My point is that if we do not fix a limit, the provincial Governments would go on taxing”. The other is by Mr. Ramaswamy Mudaliar, who said: “as far as possible, it (sales tax) should be uniform… in all the provinces. You will be killing the goose if you go on increasing the sales tax”.
These statements are puzzling. If certain taxes are left to the states, one would expect taxes to be driven down, due to constant competition among the different states to attract investment. One explanation would be the closed nature of the economy at the time – states did not have to strongly compete with lower taxes to attract private firms.
Under the proposed GST regime, the indirect tax rate(s) will be set by one central authority, the GST Council comprising of the finance ministers of the Union and the States. The GST Council does have any internal competitive pressures to anchor the tax rate. As this piece by Prashant Perumal argues, this centralisation is (theoretically) likely to lead to higher tax rates.
Whether tax competition is ‘good’ or not, is a subject of debate amongst economists and policymakers. Tax competition leads to a race towards the bottom, with governments forced to cut taxes for wealthy investors (especially corporate taxes) whilst compromising on subsidies and redistribution (Vivek Dehejia’s piece presents a brief overview of this debate). This has led to calls for cooperation among governments to limit the harmful effects of such competition. For instance, member states of the EU (a monetary union with each member state having independent fiscal policy) have agreed to a ‘Code of Conduct’ for business taxation. The agreement acknowledges both the positive and negative effects of tax competition, and aims to restrict the latter through cooperation and collaboration.

Tribute to Professor V.S. Mani - Some Personal Reflections

Guest Post By Tony Anghie

[Professor V.S. Mani passed away on August 22, 2016.  This is a solicited guest post by Professor Antony Anghie of the Faculty of Law, National University of Singapore, who is a founder member of TWAIL (Third World Approaches to International Law)]
I first encountered Professor V.S.Mani very early on in my career. He was the legal advisor to the Government of Nauru and later, one of the very distinguished counsel, together with Professor Ian Brownlie and Professor James Crawford, to appear before the International Court of Justice to successfully argue Nauru’s Case. He had a unique role to play in the proceedings, not only because of his expertise in international adjudication-the subject of his first major book-but because he was involved in the dispute from the very beginning, from the time the Nauru Commission that explored the issues surrounding the Australian exploitation of phosphates in Nauru was created; he   was instrumental in ensuring that the Nauruan claim that was derided when it was first made, gradually assumed a formidable legal character that could be brought before the ICJ. He also appeared for India before the ICJ. 

Professor Mani was a prolific author who wrote with expertise and insight on a number of major topics of international law including humanitarian law, space law, and the Charter of Economic Rights and Duties of States. His works presented the position of developing states with eloquence, rigour and a profound knowledge of the discipline. He was invited to give the Hague Lectures, among the greatest honours bestowed upon international lawyers, and testament to the international reputation he had won in the field. He chose to speak and write on the always controversial topic of Humanitarian Intervention as his subject. His erudition was immense and I was often startled by the depth and breadth of his knowledge of international law. No lawyer from a non-Western country has become a regular practitioner before the ICJ, but Professor Mani had all the qualifications and expertise and experience that would have enabled him to play this role with distinction. 
Professor Mani was elected to be the President of the Asian Society of International Law in 2011. This was a duty he undertook with a heavy heart, for it had been the hope of the whole Society that Professor Mani’s great teacher, Professor R.P.Anand, would preside over the biennial conference in New Delhi, but that was not to be. The task of organizing the Conference in New Delhi was not an easy one because of various unexpected obstacles. Professor Mani dealt with them all with his customary dedication and his considerable diplomatic skills, and thanks to him and his dedicated team of colleagues, the Conference was a great success. When I congratulated him on his achievement, with tears in his eyes he mentioned what all knew, that he had done it for his teacher. It is a shock then that he followed Professor Anand after such a short interval and that two great Indian international lawyers should leave us in a relatively short space of time.

As a person, Professor Mani was always gentle, kind and good humoured. His early passing is an immense loss to India and to the world of international law. 

[UpdateThis is a link to a review of Prof Mani's book that Prof. Anghie refers to above, and here is a link to some of Prof Mani's recent writings for The Wire].  

Sunday, August 21, 2016

The Long Road to GST Amendments and the Longer Road Ahead

Guest Post by Adithya Reddy
The constitution amendments introduced to give effect to the proposed levy of Goods & Services Tax (GST) are primarily enabling amendments conferring concurrent legislative competence on the Parliament and State Legislatures. This became necessary because GST takes within its sweep three different incidences of taxation, two of which fell under List I (manufacture and services in Entries 84 & 92 C respectively) and one under List II (sales under Entry 54). Possibility of conflict in exercise of this concurrent jurisdiction is avoided not by granting superiority to the Parliament but by constituting a GST council that will ensure uniformity in all matters of GST levy and administration. Being central levies, excise duty and service tax always had a uniform national character. Extending this feature to sale of goods, is, in my view, the most significant change brought about by these amendments in the constitutional scheme.
It was not without debate that the Constituent Assembly agreed on letting sales tax remain within the domain of states. Sales tax was a provincial subject under the Government of India Act, 1935. Some members were firmly against its continuation in this way. The concern appeared to be the tendency of states to over-exploit sales tax. Ramaswamy Mudaliar, for instance, said “as far as possible, it (sales tax) should be uniform… in all the provinces. You will be killing the goose if you go on increasing the sales tax”. Mahavir Tyagi was most forceful in his opposition to leaving sales tax to the mercy of states. Referring to the original purpose for which sales tax was left for the states, he said:
“When various taxes were enumerated in the list of provincial subjects, it was considered that the sales tax was a sort of minor help to the provinces, for their revenues were static and there was no chance for raising them. The provinces mostly depended on their land revenue which is more or less fixed for a number of years. Therefore, with the increased activities of the provincial Governments it was thought better to give them some margin of extra revenue to balance their budgets. 
Now, Sir, they got a little margin in the shape of this sales tax. As I see things, within a few years, the situation is totally changed…Now, Sir, the incidence of taxation is the heaviest in India. India had never faced even in times of war, such an incidence of taxation as it is bearing today… Because there is no ceiling limit on this sales tax, they can go on raising the tax …My point is that if we do not fix a limit, the provincial Governments would go on taxing, and we would be doing sheer injustice to the people who are at our mercy and who will have no right to protest or withhold these taxes. They would only have to draw solace from the fact that they were after all being taxed by the persons for whom they had voted.”[1]
These comments were being made in response to Ambedkar’s tabling of draft Art 264A, which removed inter-state sale of goods from the states’ purview. While Mahavir Tyagi was so critical of letting local sales tax remaining within the jurisdiction of states, Amiyo Kumar Ghosh went to the other extreme by demanding that even inter-state sales should be taxed by the states. One member, however, suggested something that could have been very similar to what may come to be under the GST set-up.
Professor Shibban Lal Saxena moved an amendment that proposed to remove restrictions on both, the State to tax inter-state trade and the Centre to fix rates of local sales tax; thus suggesting some sort of a concurrent jurisdiction for all forms of sales tax. Finally, however, draft Art 264A as introduced by Ambedkar became Art 286 of the Constitution.
The Article was (then) accompanied by an explanation which lead to the Supreme Court overruling its own view, within a span of two years, on whether the consuming state could levy tax on sellers in other states and whether the explanation was an exception to the prohibition against states taxing inter-state sales.[2] The issue was set at rest by an amendment to the Constitution and the enactment of Central Sales Tax Act, 1956 which, regulated taxation of goods moving from one state to another. The Act ensured uniformity in such taxation.
The fiscal prudence of this set up was considered by the Taxation Enquiry Commission headed by John Mathai, which categorically ruled out the possibility of centralizing sales tax on basis that it “had strong local moorings.” The business community however was relentless in attacking state-centric sales tax. FICCI presented a memorandum to the Central Government in 1960 demanding that sales tax should be levied and collected by the Central Government and then should be distributed among the States. This memorandum prompted the Government to set up a committee under the chairmanship of Dr. B.C. Roy to examine the feasibility of centralizing sales tax. But the states appeared to have vehemently opposed not just any attempt to centralise sales tax but even the then existing system of levying central additional excise duty in lieu of sales tax for a few products like sugar, tobacco and textiles. Even successive finance commissions could not ignore state autonomy. In what appears to have been the first political move on this front, the Janata Party promised abolition of sales tax as a part of its manifesto but could do little to take things forward.
Ideally this position should have changed with the introduction of VAT by most state legislatures.[3] It was quite incongruous to allow a state-based levy when the incidence of taxation had shifted from the point of sale to value addition in a supply chain that could stretch across multiple states. Under State-centric VAT legislations, the fundamental benefit of VAT, which is the removal of cascading effect of taxation, could be fully obtained only when the chain of supply fell within the same state. Once again, opposition from states to centralisation let this incongruous situation continue for more than decade.
The GST Constitution Amendment changes the constitutional scheme to enable the centralisation of all taxation on goods and services, while giving states a say in the matter through the GST Council. How the states reconcile themselves to this new constitutional arrangement will be the key to the success of GST.
There are at least three problematic issues with the proposed GST. The first, of course, will be that of separation of powers over taxation. Sec. 7 of the Model GST law released by the Government says “There shall be levied a tax called the Central/State Goods and Services Tax (CGST/SGST) on all intra-State supplies of goods and/or services at the rate specified in the Schedule . . . to this Act and collected in such manner as may be prescribed.” It is not clear from this provision whether every supply of goods and/or services will be subject to both Central GST and State GST or whether there will be a division of assesses between both levies based on the natures of goods and/or services supplied or on the basis of turnover. West Bengal, for instance, has already demanded that all dealers with a turnover limit of less than 1.5 crores should be left for the states to tax.
Next will be the issue of administration. While the states almost exclusively administered all aspects of sales tax both under CST and local law, the center will have to ensure that its current administrative set-up adjusts itself to tracking supplies within and across states. Coordination between the two authorities will be crucial. After all, if the final law contemplates concurrent assessment under central and state GSTs for the same kind of transactions, an assesse may have to undergo the harrowing experience of facing two assessments for the same transaction by two sets of officials with different administrative backgrounds.
Finally, the issue of compensating states for loss of revenue by fixing a Revenue-Neutral-Rate (RNR) of tax is likely to be very contentious.[4] The apprehension of manufacturing states has been put pithily by a senior bureaucrat of the Tamil Nadu government:-
“The worries of the manufacturing states have not been addressed properly by the union government. The revenue loss compensation assured by the union government for a specific period is a rocket booster, but it is doubtful that the proposed GST vehicle would launch the manufacturing states in the revenue trajectory they are travelling in now, especially after the booster runs out. If there is a failure in this mission, with no independent powers of taxation, such states may be left in the lurch.”
Therefore, while the long struggle for constitutional change may have attained fruition, the success of its working through statues and regulations is likely be as daunting if not more.

(Adithya Reddy is a lawyer practicing before the High Court of Madras)

[1] Tyagi’s attempts to persuade Ambedkar on the issue were caustic, to put it mildly.
[2] The decision in State of Bombay Vs. United Motors - 1953 SCR 1069 was overruled in Bengal Immunity Company Ltd Vs State of Bihar – 1955 2 SCR 61. The decision to constitute a larger bench in Bengal Immunity was taken only because one of the judges in United Motors (Justice Bhagwati) claimed to have changed his view on the provision. This manner of over-ruling precedent, unsurprisingly, attracted Seervai’s ire in his commentary.
[3] The Kelkar Task Force on the implementation of the FRBM Act, 2003 suggested that progress towards VAT system should be preceded by a comprehensive goods and service tax.
[4] The RNR of 15-15.5% recommended by the Arvind Subramaniam Committee has not been received well by the states: