Amendment in Govt of India Act 1935: Transfer of Sales Tax From Provinces to Centre

That was the day of 27 March 1950, in the session of the Constituent Assembly of Pakistan, then Finance Minister Ghulam Muhammad was addressing the members with the permission of the speaker Maulvi Tamizuddin.

“Sir, as the Honourable members are aware in 1948 owing to the then existing circumstances the item in the Seventh Schedule of the Government of India Act with regard to tax on the sale of goods, was transferred from the Provincial List to the Central List.

That legislation was passed for a period of two years which expires on the 31st of March, 1950. Sir, while those two years have passed, the circumstances under which the legislation was passed continue to exist, if anything, in very much more accentuated form.”

This was the House where Quaid-e-Azam Muhammad Ali Jinnah was presiding over the session. On March 2, 1948, Prime Minister and Defense Minister Mr. Liaquat Ali Khan introduced the Bill to amend the sales tax rule in India Act, 1935. A request was made to members to collect sales tax for two years and passed a bill to transfer provincial powers to the Centre. At that time, Dhirendra Nath Dutta, an independent member of the assembly from East Bengal, strongly resisted this bill.

At last, he gave up his resistance and said, “I hope and trust that the period given will not be extended.”

However, contrary to Dutta’s hope and trust, once again the request for a further extension of two years was presented and adopted in the House.

On March 15, 1952, while presenting the budget for 1952-53, in the Karachi session of the Constituent Assembly, under the chairmanship of Panel of Chairman Ghulam Bhik Nirang, the Finance Minister, Honorable Muhammad Ali, revealed to the house that the federal government has decided to permanently deprive the provinces of their major source of income. He said,

“In the case of sales tax, one-half of the net proceeds will go to the Centre and the other half to the units, but the distribution between the units in West Pakistan has been revised. The present position under which sales tax is administered by the Central Government, will be maintained and section 140-A of the Government of India Act, as adapted, will be given permanent effect. In pursuance of this a Bill is being separately brought up before the Constituent Assembly for amending the Constitution Act.”

THE GOVERNMENT OF INDIA ACT (AMENDMENT) BILL

The Honourable Mr. Liaquat All Khan (Prime Minister and Minister for Defence): Sir, I beg to move for leave to introduce a Bill to amend the Government of India Act. The object of this Bill is to make certain changes in the list of subjects that are in the Government of India Act, 1935. This is really in accordance with the agreement that had been arrived at between the provinces and the Centre. The Honourable the Finance Minister in his speech pointed out that for two years the sales tax was to be the Central subject.

Then there is the question of Succession Duties. That has also by agreement been made a Central subject.

Now with regard to this Bill also there is really nothing new about it and I could not give notice of it earlier or move it earlier in the House because of the reasons that I gave with regard to my first motion, but this Bill also has been in the hands of the Honourable Members since the last evening.
I requested the Office to circulate this Bill to the Members in spite of the fact that it was not on the notice paper and it could not be put on the notice paper. The importance of passing this Bill and the urgency is even greater than in the case of the other Bill, I mean, today because unless this Bill is passed into law and unless these changes are made in the Government of India Act the House cannot proceed with the Finance Bill, with the proposals for taxation with regard to Sales Tax, and, therefore, it is necessary, that before we take up the discussion of the Finance Bill and other taxation measures these changes must be made in the Government of India Act. Therefore, Sir, I hope the House will condone this short notice which was due to the reasons that I have given just now and will pass this Bill into law before the House adjourns today.

Mr. Dhirendra Nath Datta (East Bengal: General):

I oppose the motion and my reason is this….

Mr. President: (Quaid-i-Azam Mohammad Ali Jinnah: I have not yet put the motion before the House.

Motion moved:

“That leave be granted to introduce a Bill to amend the Government of India Act.”

Mr. Dhirendra Nath Datta: I oppose the motion. My reason is that we have not got copies of the Bill. We had copies of the other Bill with us long before. With regard to this Bill we did not get copies of the Bill and we have not applied our minds; so, I think, Sir that time should be given to us to apply our minds to the provisions of this Bill so that we may have an opportunity of taking part in the discussion of the Bill.

Mr. President: Is it your objection that this Bill cannot be entertained by the House because the notice has not been given according to the rules fixing the time?

The Honourable Mr. Liaquat All Khan: May I just point out that the copies of the Bill were sent to Honourable Members yesterday?

Mr. President: What is your objection? Is it confined to any rule which lays down the period of notice to be given?

Mr. Dhirendra Nath Datta: The rule is this: “If a motion for leave to introduce a Bill is opposed, the President, after permitting, if he thinks fit, a brief explanatory statement from the Member who moves and from the Member who opposes the motion, may, without further debate, put the question.”

Mr. President: What is the period mentioned there?

Mr. Dhirendra Nath Datta: The period is not mentioned but the permission of the President is necessary.

Mr. President: Your objection is that the permission of the President is not sought; permission must be sought?

The Honourable Mr. Liaquat All Khan: Sir, I seek your permission to allow me to introduce this Bill.

Mr. President: I certainly will not be in a hurry to give permission on the mere asking but I had anticipated this before I came to the Chamber and I think this is one of those cases where the President should give that permission. There are numerous precedents in other Legislatures, especially the Indian Legislative Assembly and I assure you that at times we had no idea as to what the Bill was until the Honourable Member in charge came and asked leave to introduce the Bill and requested the President to permit him to do so irrespective of any time that may have been fixed. Here, I think the Honourable Members bad the advantage of this Bill having been sent to them last night and I take it that they had plenty of time till five o’clock. It is not a very complicated Bill and if you delay it then you will face difficulties in the Finance Bill which will be coming before the Legislature.  In these circumstances, I do think that I shall myself be a party to obstructing the passage of the Bill if 1 did not give permission and therefore I do give my leave and permission. (Turning to Mr. Dhirendra Nath Datta). Now, what is your position? Do you oppose it? I thought you were supporting it? Now do you want to say anything?

Mr. Dhirendra Nath Datta: I do not propose to say anything at this stage. I shall say what I have got to say when the motion will be for legislation.

Mr. President: The question is:

“That leave be granted to introduce a bill to amend the Government of India Act,”

The motion was adopted.

The Honourable Mr. Liaquat All Khan: Sir, I introduce the Bill and with your permission, I would like to move the next motion. I beg to move:

“That the Bill to amend the Government of India Act be taken into consideration.”

Sir, I have nothing to add to what I have already said when I made the first motion asking for leave to introduce this Bill.

Mr. Dhirendra Nath Datta: I rise on a point of order; Sir. My point of order is this. We have just passed rule 41F which says that “when a Bill is introduced or on some subsequent occasion, the Member in charge may make one of the following motions in regard to his Bill, namely:

“(a) that it be taken into consideration by the Assembly either at once or at some future day to be then specified.” but the proviso is—

“Provided that no such motion shall be made until after copies of the Bill have been made available for the use of Members, and that any Member may object to any such motion being made unless copies of the Bill have been so made available for 3 days before the day on which the motion is made, and such objection shall prevail, unless the President, in the exercise of his power to suspend this rule, allows the motion to be made.”

Sir, the Bill has not been made available for our use for three days and so I submit, Sir, this motion that the Bill be taken into consideration cannot be taken at this stage.

The Honourable Mr. Liaquat Ali Khan: Sir, may I just point out that the copies of the Bill have been in the hands of the Honourable Members since yesterday and now I request you, Sir, kindly to suspend this rule and allow me to make this motion and the House to take my Bill into consideration. This is nothing new, Sir, as you are aware, in the Central Legislative Assembly of undivided India there had been many erosions on which a Bill had been introduced and the next motion was that it be taken into consideration and the next motion that it be passed, have all been done at the same sitting and the Members did not have even copies of the Bill before them. Now here in this case the subject matter of this Bill has been before the Honourable Members since the 28th of February because the Honourable the Finance Minister bad told them in his speech as to what was intended to be done. The Bill itself has been in the hands of the Honourable Members for at least 24 hours and as I pointed out in the beginning the urgency of the matter is such that this House must dispose of this business if the business of the Constituent Assembly, when it meets as Legislature, is to continue. Otherwise, I think, that the Constituent Assembly would really be creating a deadlock if it did not pass this Bill today.

Mr. President: I have already said what I have to say. The three days’ notice, upon which the Honourable member so much insists, he had—I think, all the Honourable Members had notice of it for more than three days, when they listened to the speech of the Honourable the Finance Minister on the 28th. There is nothing new in this Bill. Over and above that the Honourable Members had the actual copy of the Bill last night and they had the whole of today and the whole of the night to ponder over it. And, therefore, it cannot be urged that it is such a complicated Bill that it requires a prolonged study of it, it is an essential Bill. Then what ground can I have for not suspending this rule. I see no ground and if
I did not suspend the rule and give permission, the result will be obstruction of the Finance Bill. And
I think I shall not be justified in adopting that course and be a party to such a result. Therefore, I have no other course—and there are precedents to be followed—but to grant my permission and suspend the rule. The motion now is: That the Bill to amend the Government of India Act be taken into consideration.

“The motion is now open to discussion. (No Honourable Member came forward to speak.)

Mr. President: The question is:

“That Bill to amend the Government of India Act be taken into consideration.”

The motion was adopted.

Clause 2 was added to the Bill.

Mr. President: The question is:

“That Clause 3 stand part of the Bill.”

Mr. Dhirendra Nath Datta: Sir, I have got an amendment to move to clause 3.

The Honourable Mr. Liaquat All Khan; Have you given notice?

Mr. Dhirendra Nath Datta: No, Sir, but under rule 41-NN when a motion that a Bill be taken into consideration has been carried, any Member may propose an amendment of the Bill. I have not given notice of the amendment.

Mr. President: I have not got a copy of the amendment you wish to move. You may at least supply a copy to me.

Mr. Dhirendra Nath Datta: My amendment is this.

Mr. President: Read it out.

Mr. Dhirendra Nath Datta: Will you allow me, Sir, just a minute to write the amendment; just two minutes to write the amendment.

Mr. President: No, I am not willing to allow any Honourable Member to do that. I think you might have at least given a copy of the amendment to the President. You had plenty of time. Now you tell me that your amendment is not ready. The House should now wait until you make up your mind and write your amendment. I do not think that is fair to the House. How can I say to the House wait, wait, the Honourable Member has now got to write his amendment.

Mr. Dhirendra Nath Datta: Sir, I want to speak, with regard to this motion. Sir, this motion is that taxes on the sale of goods shall be levied and collected by the Federation, but such portion of the net proceeds in any financial year as may be prescribed shall not form part of the revenues of the Federation. In this section ‘prescribed’ means prescribed by Order of the Governor-General. It has been stated by the Finance Minister, Sir, that taxes on sale of goods has been made the central subject but certain amount—portion—of it shall be assigned to the Provinces. But, Sir, we do not know the exact amount which will be assigned to Provinces. Because the words used here are such portion of the net proceeds in any financial year as may be prescribed (‘prescribed’ means prescribed by Order of the Governor-General). The House must know what portion of the sale proceeds shall be assigned to the Provinces.

My submission to the House is this that at least half of the net proceeds shall be assigned to the Provinces. But the House is in the dark with regard to that and in the statement of the Minister in charge of Finance is mentioned that certain amount shall be prescribed. I want to know what that amount is. I think, Sir, half of the amount is to be prescribed. That is the amount which I want to move.

The Honourable Mr. Abdul Hamid (East Bengal: Muslim): Sir, I do not think that will be to the interests of the Provinces. I understand that a promise has been given that the Provinces will get the amount that ordinarily is realized from these taxes. The Centre hopes, by better administration, they will be able to realize more. That portion will go to them. The idea is that by avoiding duplication of collecting machinery and better administration will give them more. That part will certainly go to the Centre. The Honourable Member is making a motion which will be to the detriment of the Provincial interest and therefore I oppose it.

The Honourable Mr. Liaquat Ali Khan: Sir, my friend in his zeal to safeguard the interests of the Provinces is really doing harm to   them. If he can get the Provinces agree to this proposal I will request the Honourable the Finance Minister of Pakistan Government to accept that proposal without any hesitation. As a matter of fact the Honourable the Finance Minister has, in his speech, and subsequently indicated as to the terms on which this allocation is to be made and in the case of each Province the principles are different, that had been agreed upon. And, therefore, it could not be embodied in one paragraph here as to what would be the principles that would apply in the case of Bengal, Punjab, Sind, North-West Frontier and so on and therefore I would request him not to persist with this motion of his otherwise the Provinces may say God save us from such friends.

Mr. Dhirendra Nath Datta: I am glad to hear that.

Mr. President: The question is:

“That Clause 3 stand part of the Bill.”

The motion was adopted.

Clause 3 was added to the Bill.

Clauses 4 to 6 were added to the Bill.

Clause 1 was added to the Bill.

The Title and Preamble were added to the Bill.

The Honourable Mr. Liaquat All Khan: Sir, I move: “That the Bill be passed.”

Mr. Dhirendra Nath Datta: I hope and trust that the period given is not extended.

Mr. President: The question is:

“That the Bill be passed.”

The motion was adopted.

Mr. President: This House now stands adjourned sine die. The Assembly then adjourned sine die.

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