New Delhi As the recommendations of the Goods and Services Tax (GST) Council are not binding on the central government or states, the Supreme Court on Thursday rejected the Centre’s argument that the entire structure of GST would crumble if the mandate of the council is not enforceable. is believed.
Justice Dhananjay Y. Chandrachud observed that “the object of the Parliament is only a persuasive value to the recommendations of the GST Council, especially when interpreted with the objective of the GST regime, to promote cooperative federalism and harmony among the constituents”. . units.”
Underlining that the Parliament and the state legislatures have the same power to make laws on GST, the court observed that the “recommendations” of the GST Council, as enunciated under Article 279A of the Constitution, are only in nature. should be considered recommendatory. “Orders to treat them as binding would stifle fiscal federalism, where both the Center and the states are given equal power to make laws on GST,” said the bench, also comprising Justices Surya Kant and Vikram Nath.
“The GST Council has the power to make recommendations on a wide range of subjects related to GST. Since the Constitution does not envisage an adversarial provision for resolving discrepancies between the Central and State laws on GST, the GST Council should ideally act, as provided by Article 279A(6), and cooperation in a coherent manner to reach a workable financial model through collaboration,” it added.
Revenue Secretary Tarun Bajaj said the court’s observations reiterated the scheme of things in the Constitution and the GST laws. In a briefing, Bajaj said that the council will continue to function the way it has been doing for the last five years. The apex court made this observation in a case of tax dispute with a private firm over integrated GST on maritime goods. Bajaj said it is not a Centre-State dispute and if a review petition is filed, it will be only in the context of that dispute.
A person familiar with the preliminary analysis of the government’s decision said that the court observed that the recommendations of the GST Council have persuasive value to the primary law, i.e., to make laws that are binding as far as subordinate legislation is concerned, that issuance of notifications, making rules and prescribing rates and taxes.
“This decision does not in any way introduce anything new with respect to the GST institutional mechanism, has no bearing on the way GST works, nor suggests anything fundamentally different to the existing framework of GST. ” The person quoted above said.
Bajaj said GST was introduced to create a unified market and to remove cascading taxes and improve ease of doing business. “If you look at the decisions of the GST Council, all the decisions were taken by consensus,” Bajaj said. One decision that was voted on was on the issue of taxation of lotteries.
“The fact is that if the Center and the states join hands, it is good for all,” Bajaj said.
The top court disagreed with the Centre’s contention that the legislature and executive are bound by the recommendations of the GST Council on three initial provisions, charges, exemptions and rule-making power, and that the entire structure of GST would collapse as each state would. Then putting in place a conflicting tax and collection mechanism. If the GST Council was intended to be a constitutional body whose recommendations are turned into law without interference, there would have been an explicit provision in Article 246A, which stipulates that both the Parliament and the State Legislature must make laws on GST. ‘s power. The bench said.
“The argument that if the recommendations of the GST Council are not binding, the entire structure of the GST will crumble, does not hold water. Reading out the provisions of the Constitution, the role of the GST Council is reduced to that of a constitutional body, constituted to take decisions by collaborating and opposing views,” it asserted.
The Union Finance Minister heads the GST Council and includes the Union Ministers of State who are in charge of the revenue and finance ministers of the state governments. The court’s decision came on a batch of appeals filed by the Center against the Gujarat High Court’s decision of 2020, which quashed the levy of IGST on importers on sea freight under reverse charge. The High Court held that no tax is levied on sea freight for services rendered by a person located in a non-taxable area under the IGST Act, 2007, for goods by a ship from a place outside India. through transport. To the customs station of clearance in India.
Even when the court upheld the Centre’s contention that an importer can be classified as a ‘recipient’ of services and upheld the 2017 notification on sea freight, the court held that the goods and dismissed the petition on two separate levies on services, when there is already an Indian importer. Liability to pay IGST on ‘composite supply’ under the GST Act, which includes supply of goods and services of transport, insurance etc.