The Parliament was empowered till 1956 to levy tax on sale or purchase of newspapers. However, no such tax was ever levied and Parliament enacted taxes on Newspapers (Sale and Advertisements) Repeal Act, 1951, whereby taxes levied earlier on sale and advertisements published therein was repealed. The object was to put an end to the power which was available through Entry 48, List II, Government of India Act, 1935.
Under our Constitution, tax on newspapers have been consciously avoided with Entry 92A of the Union List permitting levy of sales tax on inter-State or commerce on goods other than newspapers and Entry 54 of the State List permitting levy of sales tax by the State on sale or purchase of goods other than newspapers. However all this is old news. Whether due to error or conscious design, the GST scripts a different story. The historic 101st Constitutional Amendment passed by the Rajya Sabha on August 3, has introduced a twist.
The new Article 246A empowers Parliament and the State to make laws with respect to GST imposed by the Union or by such State. Article 366(12A) defines GST to mean any tax on supply of goods or services or both except taxes on supply of alcoholic liquor for human consumption. Article 366(26A) defines ‘services to mean anything other than goods’. Post the Constitutional Amendment; both the Centre and the State would have the power to levy GST on newspapers.
It is not as if such an important element would have slipped through by over sight, given the nature of the law and the seriousness of the amendment. A reading of the model law makes this fear real, since definition of ‘goods’ as per Section 2(48) of the Model Law covers every kind of movable property. There is no exclusion for ‘newspapers’.It is not as if press is immune from taxation or from laws relating to industrial relations or conditions of service as emphasised by the Supreme Court in Express Newspapers case AIR (1958) SC 578. The prohibition is up on the imposition of restrictions directly relating to right to publish, right to disseminate information and circulation.
The SC, in Sakal Papers (1962) 3 SCR 842 struck down the Newspaper (Price and Page) Act, 1956 which empowered Centre to regulate price in relation to pages and sizes and to regulate allocation of space for advertisements. It was struck down on the grounds that it violated Article 19(1)(a), which grants freedom of speech and expression. The SC also struck down Newspaper Control Order issued under Essential Commodities Act, 1955 in Bennett Coleman and Company Limited case (1972) 2 SCC 788.
The SC, in the case of Indian Express Vs. Union of India (1985) 1 SCC 641 not only emphasised importance of freedom of press, but also held that in view of the intimate connection of newsprint with the freedom of press, tests for determining the vires of a statute taxing newsprint have to, therefore, be different from tests usually adopted for testing vires of other statutes. In ordinary taxing statutes, law may be questioned only if they are openly confiscatory or a colorable device to confiscate. On the other hand, in the case of tax on newsprint, it may be sufficient to show a distinct and noticeable burdensomeness, clearly and directly attributable to the tax.
It is well known that cost of printing and publishing is not recovered in its price, but offset through advertisements. A levy would ensure the death of the press that we know. Assuming it is indeed levied, it is likely to open a Pandora’s Box, since model law contemplates valuation based on sale price subject to Valuation Rules. One need not be a story writer to imagine comparison of prices in assessments.
Now that the Constitution has been amended, the only solution is through the GST Council which will have to recommend non-applicability under Article 369(4)(b), which will then have to be incorporated in CGST, IGST and SGST laws. Exemption through a notification is not an appropriate solution given that a position of non-taxability is far superior to that of an exemption dependent upon an executive fiat.
(The author is an advocate of the Madras High Court. Views expressed in the article are his own and not the views of The Sunday Standard)