1. Introduction and background
The COVID-19 crisis has caused an unprecedented crisis in various aspects of "life". In India, the 2nd wave is having a devastating effect in terms of number of causalities, contributed by the lack of health care facilities (beds & oxygen), the shortage of medical supplies, doctors and nurses and vaccines. In a desperate attempt to fulfil the shortages, the government reduced IGST on the oxygen concentrator to 12%, when imported as gift.
But this conditional waiver of taxes was expected, but just was not having the respite, the people deserved. In one of the rarest incidences, the Delhi High Court invoked Article 21 of the Constitution of India (COI) to expand the contours of a customs exemption notification, giving the sought-after relief. The judgment could potentially be the dawn of a new era to challenge the status quo of GST Council's decisions. In this piece, the author discusses, the placement of Article 21 apropos tax statutes.
2. Inter-play between tax and Article 21
The first aspect of Article 21 enshrines that "no person shall be deprived of his life, except as per procedure established by law". Over the years, the contours of this right have been expanded to include 'right to medical facilities', 'affordable treatment', 'state's positive responsibilities to preserve life' etc.
While the exaction of tax [at certain rate] on certain commodities ipso facto does not impair a person's life [1], however, it is well settled that Article 21 is not a wide ocean. If any of State's action is not proper, just or fair, then the action is liable to be discarded, and an excessive and un-affordable tax, in a situation as drastic as the COVID-19 might just fits into description. In the context of Article 19, the Hon'ble SC [2] had observed that a tax that [so excessive] that it transgresses into right of freedom of speech, is liable to be invalidated, such analogy should equally apply for Article 21 also.
The only question that remains is the threshold of proper, just and fair. The answer probably lies in the affordability of the treatment of COVID-19. The services in health care sector are exempt from GST, but the goods [medicaments] suffers GST at 5% [3]]. To a naked eye, these taxes may not appear burdensome, but consider following factors;
- The minimum wage in India is ~INR 5,000, say the cost of treatment is INR 1,350 per person [out of which taxable component is INR 600]. A daily labour [family of 3 elders] earning 5,000 has to shell out tax for saving his life ~125 in GST [roughly 2.5% of monthly pay]. In such a low bracket income, the health care even at 1% of his earning is excessive, 2.5% seems so unreasonable.
- Consider the macro statistics, the revenue collection, Import IGST on imports of goods on Chapter 9804 during the period Apr-Feb 2021 is not more than 40 Crore [statistically it is even lower]
- The healthcare services are zero-rated [GST] in multiple European jurisdictions
Considering that the taxes on the lifesaving drugs are [1] highly un-affordable for a daily labourer and [2] does not make much impact on the revenue collection, and the fact that we are in amidst of a crisis of highest proportion leads to a reasonable view that the GST on the COVID-19 related drugs/ vaccine should be made duty free. If not, it's a suitable case for invocation of Article 21 to meet the ends of it.
3. The judicial developments - one step forward
The Delhi High Court in Gurucharan Singh vs MOF (DOR) - 2021-VIL-405-DEL extended the total IGST exemption on the oxygen concentrators under the S. No. 607A of Notification No. 50/2017-Cus, even for personal use by individuals, by moulding the conditions attached to it. The most important observations of the decision which uplift the argument of Article 21 in the light of critical situations are;
(i) Exaction of tax by State in normal times is ordinarily, and Courts would preserve them to the maximum threshold. But in times of peril, the test on survival of tax on anvil of Article 21 is "not its form but the impact of it which determines its tenability".
(ii) The state's over-enthusiasm that they have taken steps is not supported by any facts/ figures, and as per broad-bush approach, the petitioner had proven that IGST is 'distinct and noticeable burdensome'
(iii) In times of war, famine, floods, epidemics and pandemics, the State should relent, or at least lessen the burden of taxes/ duties to allows a person to live a life of dignity
(iv)Every day counts, so cumbersome certification procedure is both impractical and inefficacious.
The judgment over-all sums up very beautifully that the relief is not in the nature of relief from tax, but relief on account of irresistible effects pandemic in the Country.
4. The judicial/ executive developments - two steps back
The GST Council finally convened on 28 May 2021 and offered the tax sops, albeit in the most crying situation. The Council also constitute a group of ministers to consider tax further tax reliefs on covid situation. Close on the heels of everything above, the Supreme Court on 01 June 2021 - 2021-VIL-58-SC, stayed the above decision in the SLP filed by the State against the Delhi High Court's order.
The Attorney General presented the rudimentary arguments of taxes being policy matters, reminding the Hon'ble Court that GST Council exists and its own order of 2020 "You remember there was a petition for exemption of GST on wheelchairs? Where you did not want an intervention by the Court". The Supreme Court taking note of the GST Council's above measure, issued the notice returnable in 4 weeks.
All due respect, the very pretext of GST council is illusory for number of demonstrated reasons;
- the Council is very slow; it almost took 2 months for them to convene and consider the suggestions when every day counts. In these crucial times they did not meet at all for more than 6 months!
- the decisions are taken by fitment committee more on revenue considerations rather than Article 21 - so very measure to direct a person seeking relief under Article 21 to Council is illusory
- the fitment committee has firmly refused 'zero rating of supplies other than exports', so even if a certain situation deserves 'zero rating' on the pretext of Article 21, going to Council is empty formality. The GST Council is increasingly being perceived as an extension of the executive (CBIC)with the sole motive of augmenting taxes whatever the situation.
- the Council is losing its repute day by day, re-call that the derogatory measures under Notification No. 94/2020-CT were issued solely on the decisions taken by GIC without placing it before the GST Council. For revenue's favour the Council can by-pass the administrative mechanism, but for the need of the hour, it takes lengthy time for deliberations.
Overall, it can be said that these drastic times require drastic measures, the GST Council hardly cares about the Article 21, it is only the Courts that can give the positive colour to the situation. It is hopeful that Article 21 would not be given a go-by on the illusions of hopeless and delayed administration of the Council.
5. Other commodities/provisions that could be under the scanner
The Delhi High Court judgment might just be the beginning of something big (if allowed to be prevailed and supplemented by SC). Considering that the tax rates under GST are "notified" by the Government, the Courts may no longer have to debate on whether it's within their power to direct government to grant exemption, since the Court hold that the notified rate of tax itself is unreasonable. If we can think of certain measures that may involve invocation or Article 21
- The rate of tax of two wheelers [up to a certain threshold] should be taken out from the upper tax category [28%]. A motor bike is no longer a luxury, a large portion of Indian workforce use motorbike/ mopeds for making their ends meet every day. Putting the motor bike in the luxury tax bracket makes little sense in 2021[4].
- Provide enabling power to the Appellate Authority/ Tribunal to recompense the litigation costs to the taxpayer, where the exercise of the lowers authorities is found to be palpably harassing
- Reduction in present pre-deposit structure equivalent to the success rate of the revenue authorities before the Tribunal, and capping the maximum amount to a reasonable amount
- Tightening the belt on intelligence authorities (DRI), by holding the officers personally responsible for human rights exploitation e.g., mandating that person in charge shall be dealt stringently in case of defaults in installation of CCTV
- Zero rating essential health care services (even if provided with certain conditions e.g., the private hospitals to provide concessional services to the poorer section to certain threshold)
Conclusion
Sure, do the cases, where Article 21 can be invoked is rare, but it also indicates that the government has not too much to correct. Even if the basis standards of right to life are preserved through some pro-active measures, the GST law might never need Article 21 assistance. It is hopeful that the GST Council and all the appropriate governments pay heed to the immediate COVID crises and introduce the required measures, before it's too late.
[Date: 04/06/2021]
(The views expressed in this article are strictly personal)
[1] In State of Punjab Ram Lubhaya Bhagga [MANU/SC/0156/1998] it was held by the Supreme Court that protection under Article 21 is subject to State's available finances.
[2] Indian Express Newspapers (Bombay) Private Limited vs UOI (1985) 1 SCC 641
[3] Standard rate
[4] In the famous case of Olga Tellis 1986 AIR 180, the livelihood aspect has been held an essential component of 'right to life'