Polity & GovernancePriority2025-12-10

Parliament Passes Manipur GST Amendment Act 2025

Why focus: Parliament exercising State powers under Art 356. Iron Law 4 auto-include. Sets up high-probability GS2 Assertion-Reason on GST Council.

In News

What Happened

On December 10, 2025, the President gave assent to the Manipur Goods and Services Tax (Second Amendment) Act, 2025. It was passed by the Union Parliament because Manipur was under President's Rule, meaning the State Assembly's legislative powers were suspended. The Act aligns Manipur's state tax laws with the latest national GST reforms, specifically implementing the 56th GST Council's decisions.

Why It Matters

This highlights the constitutional mechanics of Article 356, showing how the Union Parliament steps in to manage state-level fiscal responsibilities during President's Rule. It also ensures Manipur's taxation system remains synchronized with the rest of India, implementing crucial anti-evasion measures like the 'track-and-trace' mechanism to prevent revenue leakage.

Background

History & Context

Following the 56th GST Council meeting, the Central Goods and Services Tax (CGST) Act was amended via the Finance Act 2025. All states were required to pass parallel amendments to their State GST (SGST) Acts. However, Manipur was under President's Rule (Article 356) due to ongoing instability, rendering its State Assembly non-functional. To avoid revenue loss and implement the reforms, the President promulgated the Manipur GST (Second Amendment) Ordinance on October 7, 2025. During the Winter Session, Finance Minister Nirmala Sitharaman introduced the replacement Bill in Parliament, which exercised the state's legislative powers under Article 357. The Lok Sabha passed it on December 1, and the Rajya Sabha returned it on December 2, 2025.

What Changed

▶
Insertion of Section 148A: Introduces a 'track-and-trace' mechanism requiring unique identification marking on specified goods to prevent tax evasion.
▶
Insertion of Section 122B: Imposes a strict penalty for failing to comply with the new track-and-trace system, amounting to ₹1 lakh or 10% of the tax payable, whichever is higher.
▶
Amendment of Section 107 and 112: Mandates a 10% pre-deposit of the penalty amount before filing an appeal against penalty-only orders, standardizing the dispute resolution process.
▶
Insertion of Section 74A: Establishes a common timeframe (42 months from the annual return due date) for issuing notices regarding unpaid taxes or wrongfully availed Input Tax Credit (ITC) from FY 2024-25 onwards.
▶
Simplification of Voucher Rules: Removes complex time-of-supply rules for vouchers, clarifying that issuing a voucher itself does not constitute a supply of goods or services, thereby reducing litigation.
▶
Taxation on Extra Neutral Alcohol (ENA): Amends Section 9 to legally enable the levy of State GST on undenatured Extra Neutral Alcohol used for manufacturing alcoholic liquor for human consumption.

What Did NOT Change

Despite being passed by the Union Parliament, the revenue collected under this Act remains State Goods and Services Tax (SGST). The funds do not permanently accrue to the Consolidated Fund of India; they remain earmarked for the State of Manipur. Furthermore, the amendment did not alter the fundamental structure of the GST Council's consensus-driven rate-setting mechanism.

Prelims Angle

NCERT Connection

This event directly applies the concepts found in Class 11 Political Science NCERT (Indian Constitution at Work), Chapter 7: Federalism. The chapter explains the emergency provisions under Article 356 (President's Rule). When Article 356 is invoked, the federal distribution of legislative powers is temporarily suspended, and Parliament assumes the power to legislate on items in the State List (like SGST). This Act serves as a perfect real-world example of unitary centralization during a state emergency.

Common Misconceptions

✗ During President's Rule, state laws are directly made by the President via executive order or ordinance by default.

✓ Under Article 356 and 357, the legislative power of the State Assembly is transferred to the Union Parliament, not the President. The President only issues ordinances for the state when Parliament is not in session (as seen in the Oct 7 Ordinance), which must later be replaced by an Act of Parliament.

The term 'President's Rule' heavily implies that the President personally assumes all dictatorial or legislative functions, ignoring the constitutional role of the Union Parliament as the substitute state legislature.

✗ State taxation bills passed by Parliament for a state under President's Rule are treated as ordinary bills requiring passage by both houses.

✓ The Rajya Sabha merely 'returned' the Manipur GST Bill to the Lok Sabha, indicating it was processed as a Money Bill. Under Article 109, Money Bills are exclusively voted on by the lower house.

Students often forget that when Parliament acts as a State Legislature, state financial bills retain their constitutional character as Money Bills. Consequently, the Lok Sabha exercises the same exclusive financial powers as the suspended State Legislative Assembly.

Practice Questions

Q1

How Many Correct

Consider the following statements regarding the enactment of the Manipur Goods and Services Tax (Second Amendment) Act, 2025: 1. The Act was passed by the Union Parliament exercising powers under Article 357 of the Constitution. 2. The Act mandates that the SGST revenue collected during President's Rule shall be permanently credited to the Consolidated Fund of India. 3. The Act introduced Section 148A, enabling a 'track-and-trace' unique identification marking system for specific goods. How many of the statements given above are correct?

Q2

Match the Following

Match the newly introduced/amended sections of the Manipur GST (Second Amendment) Act, 2025 (List I) with their respective provisions (List II): List I A. Section 74A B. Section 107 C. Section 122B D. Section 148A List II 1. Imposes a 10% pre-deposit for appeals against penalty-only orders 2. Penalizes non-compliance with the track-and-trace mechanism 3. Mandates unique identification marking on specified goods 4. Sets a 42-month timeline for determining unpaid tax and wrongfully availed ITC

Q3

Assertion & Reason

Assertion (A): The Rajya Sabha did not formally pass the Manipur GST (Second Amendment) Bill, 2025, but merely returned it to the Lok Sabha. Reason (R): Under Article 356, the Rajya Sabha loses all its legislative powers regarding a state, and only the Lok Sabha can legislate on matters enumerated in the State List. Select the correct answer from the codes given below:

Up next