Section 174 of GST Act: Repeal and saving

Notes On CGST Section 174(1)

1. Repeal of Old Excise and Tax Laws:

Section 174(1) of the Central Goods and Services Tax (CGST) Act, 2017, states that from the date the CGST Act comes into effect, certain existing laws related to central excise and additional duties are repealed. This means that these laws are no longer in force, except for specific provisions related to goods listed under Entry 84 of the Union List in the Seventh Schedule of the Indian Constitution.

2. Laws That Have Been Repealed:

The section specifically repeals the following five acts:

1. Central Excise Act, 1944 – The primary law governing central excise duty on manufactured goods (except for goods under Entry 84, such as petroleum and tobacco).
2. Medicinal and Toilet Preparations (Excise Duties) Act, 1955 – Imposed excise duties on medicinal and toilet preparations containing alcohol, narcotics, or similar substances.
3. Additional Duties of Excise (Goods of Special Importance) Act, 1957 – Imposed additional excise duties on certain essential goods.
4. Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 – Applied to textiles and textile-related products.
5. Central Excise Tariff Act, 1985 – Provided tariff classifications for goods under excise duty.

3. Exception – Goods under Entry 84 of the Union List:

Although these acts are repealed, excise duties will continue to apply to certain products listed in Entry 84 of the Union List, such as:

• Petroleum products (petrol, diesel, natural gas, crude oil, etc.)
• Tobacco and tobacco products

These goods are not covered under GST and continue to be taxed separately under excise laws.

4. Impact of the Repeal:

• With the introduction of GST, excise duties on most goods are removed and replaced by the GST framework.
• Only a few select products (like petroleum and tobacco) remain subject to excise duties.
• Businesses no longer need to comply with multiple indirect tax laws, as GST consolidates various taxes into a single system.

Conclusion:

CGST Section 174(1) formally repeals outdated excise laws, except for specific products under Entry 84 of the Union List. This marks the transition from the old indirect tax system to the GST regime, simplifying taxation in India.

Explanation of CGST Section 174(2)

Section 174 of the Central Goods and Services Tax (CGST) Act, 2017 deals with the repeal and savings of the earlier indirect tax laws, such as Central Excise Act, Service Tax provisions under Finance Act, VAT laws, etc., which were replaced by GST.

Key Takeaways from Section 174(2):

When the old tax laws (such as Excise Duty, Service Tax, VAT) are repealed or amended by GST, the repeal does not mean that everything under the old laws is erased. Instead, certain rights, liabilities, and proceedings under those laws continue even after the repeal.

Clause-wise Breakdown:

1. Sub-clause (a): No Revival of Non-Existent Laws or Rights
   • If something was not in force before the repeal (e.g., an expired exemption or law), it does not get revived after the repeal.
2. Sub-clause (b): Past Actions Remain Valid
   • Any actions or transactions that happened under the old laws remain valid even after their repeal. For example, if service tax was applicable on a transaction before GST, that liability does not disappear just because of the repeal.
3. Sub-clause (c): Rights, Privileges, and Liabilities Continue
   • Any rights (e.g., tax refunds), privileges, obligations (e.g., tax payments), or liabilities (e.g., penalties, fines) that arose under the old laws continue to exist.
   • Exception: If an investment-based tax exemption was given through a notification, that exemption will not continue if the notification is rescinded after GST implementation.
4. Sub-clause (d): Dues, Penalties, and Punishments Stay
   • Any pending tax, surcharge, penalty, interest, fine, or punishment from the old tax regime does not get canceled.
   • If someone committed an offence under Service Tax laws before GST, they can still be penalized even after the repeal.
5. Sub-clause (e): Investigations and Legal Proceedings Continue
   • Any audit, investigation, assessment, adjudication, or recovery proceedings that started under the old laws can continue as if those laws were still in force.
   • Example: If a business is being audited for service tax compliance, that audit can continue even after GST implementation.
6. Sub-clause (f): Appeals and Legal Cases Continue Under Old Laws
   • Any appeals, reviews, or references filed before or after GST under the old tax laws will be decided based on the old laws.
   • Example: If a business filed an appeal against a service tax demand before GST, the case will still be decided under the Service Tax laws.

Conclusion:

• Section 174(2) ensures that the transition to GST does not erase past tax obligations or legal proceedings under the old laws.
• This protects the government’s right to collect past dues and ensures pending cases are resolved under the laws that existed when the issue arose.
• However, investment-based tax exemptions granted under the old laws do not automatically continue unless specifically allowed.

Explanation of CGST Section 174(3)

What This Section Means:

Section 174(3) of the CGST Act, 2017 clarifies that the specific provisions mentioned in sub-sections (1) and (2) do not limit or override the general principles of repeal stated in Section 6 of the General Clauses Act, 1897.

In simpler terms:

• Sub-sections (1) and (2) list specific situations where rights, liabilities, investigations, penalties, and legal proceedings under the old tax laws continue even after their repeal.
• However, this does not mean that the general legal principles governing the effect of repealing a law (as per the General Clauses Act, 1897) are ignored.
• Section 6 of the General Clauses Act, 1897 already states that when a law is repealed, existing rights, obligations, and legal proceedings generally remain unaffected unless specifically stated otherwise.

Understanding Section 6 of the General Clauses Act, 1897

Section 6 of the General Clauses Act provides that if a law is repealed, the repeal does not:

1. Revive any previous law that was already repealed.
2. Affect any rights, obligations, or liabilities that arose under the repealed law.
3. Affect any legal proceedings already started under the repealed law.

In essence, even if Section 174(1) & (2) of the CGST Act had not explicitly listed what continues after repeal, Section 6 of the General Clauses Act would have still applied to ensure that past obligations and legal matters under old tax laws do not disappear.

Why This Clarification in Section 174(3)?

• This removes any doubts that might arise regarding whether only the specific cases mentioned in Section 174(1) & (2) continue, or if the broader legal principle of Section 6 of the General Clauses Act also applies.
• It reinforces that the repeal of old tax laws does not wipe out past obligations or legal proceedings unless explicitly stated.
• It ensures that if any issue is not covered in Section 174(1) & (2), the General Clauses Act will still apply, thereby preserving past legal actions, rights, and liabilities.

Conclusion:

• Section 174(3) acts as a safeguard by stating that the repeal provisions under CGST do not limit or exclude the general principles of repeal in Section 6 of the General Clauses Act, 1897.
• This means that any rights, liabilities, proceedings, or penalties from the old tax regime continue unless explicitly nullified, ensuring a smooth legal transition to GST.