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GST Council recommendations not binding on Centre, states:
Image Source : INDIA TV

GST Council recommendations not binding on Centre, states: Supreme Court

The Supreme Court on Thursday upheld the Gujarat High Court's verdict that quashed the levy of Integrated GST (IGST) on the importers on ocean freight under reverse charge. The apex court ruled that the recommendations of the Goods and Services Tax (GST) Council are not binding on the Centre and states.

A bench of Justices DY Chandrachud, Surya Kant and Vikram Nath held that the GST Council's recommendations will only have a 'persuasive value'. The court also held that the Parliament and the state legislatures possess the power to legislate on GST and the recommendations of the Council are the product of a 'collaborative dialogue'.

The Gujarat HC in its verdict had held that no tax can be levied under the IGST on the ocean freight for the services provided by a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station in this country. It had quashed the 2017 notification of the Centre by which IGST of 5 per cent would be levied on the services of transport of goods in a vessel.

The GST Council is a committee that has the mandate to decide on the indirect tax system on goods and services in the country. It is headed by Union Finance Minister Nirmala Sitharaman and Finance Ministers of all the states are its members. So far, the Centre and states have followed the GST Council's recommendations on the tax arrived through consensus.

In its 153-page verdict, the court observed that the council is not merely a constitutional body restricted to the indirect tax system in India but is also an important focal point to foster federalism and democracy.

Justice Chandrachud said that the argument that if the recommendations of the GST Council are not binding, then the entire structure of GST would crumble does not hold water. To regard recommendations as binding edicts would disrupt fiscal federalism, where both the Union and the states are conferred equal power to legislate on GST, the court noted.

Centre's say

The Centre said the top court's ruling on the applicability of the GST Council's decisions is unlikely to materially impact the one-nation-one-tax regime as it is only a reiteration of the existing law that gives states the right to accept or reject the panel's recommendation on taxation -- a power that none has exercised in the last five years.

Revenue Secretary Tarun Bajaj said the recommendations of the GST Council, as per the Constitutional amendment, were always a guidance and never mandatory compliance.

Asked by reporters if there is any need for change in the GST law in the wake of the court ruling, Bajaj said, "I don't see any (need) at this point."

Article 279A(6)

The top court rejected the Centre's contention that the recommendations of the GST Council are binding on the legislature and the executive and said since the Constitution does not envisage a repugnancy provision to resolve inconsistencies between the Central and State laws on GST, the GST Council must ideally function, as provided by Article 279A(6), in “a harmonised manner to reach a workable fiscal model through cooperation and collaboration”.

It said the recommendations of the GST Council are not binding on the Centre and states the reasons that “the deletion of Article 279B and the inclusion of Article 279(1) by the Constitution Amendment Act 2016 indicates that the Parliament intended for the recommendations of the GST Council to only have a persuasive value, particularly when interpreted along with the objective of the GST regime to foster cooperative federalism and harmony between the constituent units”.

The court said a reading of the Statement of Objects and Reasons of the 2014 Amendment Bill, the Parliamentary reports and speeches indicate that Articles 246A and 279A of the Constitution were introduced with the objective of enhancing cooperative federalism and harmony between the Centre and states.

Non-BJP rules states welcome verdict 

Tamil Nadu and Kerala, where the DMK and the Left Front are in power respectively, welcomed the verdict. In the light of the judgment, TN Finance Minister Palanivel Thiaga Rajan tweeted that the GST regime 'requires a complete overhaul'. Though this aspect (of the GST council's powers and that of taxation rights of governments) was known earlier, it has been established by the court judgment, he said.

Kerala Finance Minister K N Balagopal said the court ruling upholds the federal rights of the states and people. Balagopal, a critic of the GST structure, said in a series of tweets that the apex court's judgement on "powers of GST Council on taxation and State government's rights is a landmark one."

With PTI Inputs 

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Source: Nanfang Daily Online    Editor in charge: hit