GST ruling. Ruling will not have any bearing on GST functioning, says government

The government says the ruling by the Supreme Court on the applicability of the GST Council recommendation does not have any bearing on the indirect tax regime, which is in place since July 1, 2017.

“This judgment does not in any way lay down anything new so far as the GST institutional mechanism is concerned, does not have any bearing on the way GST has been functioning in India, nor does it lay down anything fundamentally different to the existing framework of GST,” a government source said.

Further, he clarified that the detailed Judgment has just been released and will be reviewed. He maintained that the Court has observed that while the recommendation of the GST Council has persuasive value for primary legislation, i.e. framing of the law, the recommendations of the GST Council are binding so far as subordinate legislation is concerned, i.e., issue of notification, framing of rules, prescribing rates and taxes, etc.

The Apex Court, while disposing of an appeal by the Centre against the Gujarat High Court ruling on Integrated Goods and Services Tax (IGST), had earlier observed that recommendations by the GST Council are not binding on the Union and States but persuasive only.

 “It is thus amply clear that Court has elaborated upon the Constitutional Scheme concerning GST,” another source said. As prescribed in Article 279A of the Constitution, the Council makes recommendation to the Union and the States on issues such as model GST law, principles of levy, and apportionment of GST levies on interstate supplies, principles relating to place of supply, GST rates and special provisions with respect to certain States. These recommendations are arrived at after deliberation in the GST Council in which all States participate, he added.

These recommendations of the Council are implemented by the Centre and States through the normal legislative process under their respective Acts. The Central and State Acts also specifically provide that levies, exemptions, and rules, etc. would be prescribed on the recommendation of the Council through subordinate legislation. “The recommendations of the GST Council are binding in so far as they relate to subordinate legislation, as has also been reiterated by the Court in its order,” the source quoted above said.

The GST has been working on this collaborative institutional mechanism, where the Centre and States follow the recommendations of the Council, which have been arrived at with consensus. There has been only one instance where the GST Council took a decision by voting, and even in this case, the dissenting States implemented the decision of the GST Council. In all other instances, which run into more than a thousand, the decisions have been taken with consensus. Having said that, the constitutional scheme as stated above is to the effect that the Council is a body that makes recommendations to the Centre and States. This has been the finest example of collaborative and cooperative federalism.

“The Court has only elaborated this mechanism while making its observations,” the source said.

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