Supreme Court says Centre, states not bound to recommendations of GST council

Supreme Court says Centre, states not bound to recommendations of GST council

Supreme Court says Centre, states not bound to recommendations of GST council

The Supreme Court Thursday ruled that the recommendations of goods and services (GST) Council are not binding on the Central and state government and they are of recommendatory nature.

An apex court bench led by Justice DY Chandrachud held that the Parliament intended that the "recommendations of the GST Council will have persuasive value as India is cooperative federalism."

The top court also held that both the Parliament and the State legislatures possess equal powers to make laws in relation to goods and services tax and it is for the GST Council to advice suitably.

"The Constitution does not envisage a repugnancy provision and GST council must work in harmonious manner to achieve workable solution," the court said.

It is seen as a landmark judgement that may impact the landscape of GST provisions under judicial review.

The Central government and several importers had been fighting a legal battle in the Supreme Court over applicability of GST on transportation of imported goods through sea route.

With its judgement, the apex court Thursday dismissed an appeal by the Central government against an earlier Gujarat High Court judgement that said that Integrated GST (IGST) on ocean freight is unconstitutional.

Justice Chandrachud said, "recommendations of the GST council are a product of collaborative discussion. It is not imperative that federal units must always possess a higher share."

Reading the operative portion of the ruling in the Government vs Mohit Minerals case, Justice Chandrachud further said that GST council is also an area of political contestations and that it impacts federalism.

Justice Chandrachud cited two articles of the Constitution and said that 246A treats state and Centre as equal, while 279A says that state and Centre cannot act independent of each other. This also points towards competitive federalism.

Abhishek A Rastogi, Partner at Khaitan & Co, who argued on behalf of importers, said the judgement by the Supreme Court may change the landscape of the provisions under GST which are subject to judicial review.

"As the court has gone ahead to categorically hold that the GST Council recommendations have only persuasive value, there will be pragmatic approach to the provisions which are subject to judicial review by way of challenge to the constitutionality of such provisions based on GST Council recommendations," he added.

Pointing out the essence of GST's original concept to create a 'one tax, one country' vision, Senior economist Arvind Virmani said, "If States legislate different #GST rates for different Goods & services, the original concept of one tax one country is dead. Is there a flaw in the constitutional amendment or the GST law that implements it? If the latter, it can & must be corrected immediately!"