GST Council's recommendations not binding on govts: SC
Says Centre and State can’t act independent of each other as per Article 246A and Article 279 of the constitution; GST Council must work in a harmonious manner to achieve a workable solution between Centre and States
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New Delhi: The Supreme Court Thursday ruled that the Goods and Service Tax (GST) Council's recommendations are not binding on Union and State but have a persuasive value as the country has a cooperative federal structure.
A Bench of Justices DY Chandrachud, Surya Kant, and Vikram Nath also held that the Centre and State governments have simultaneous powers to legislate on GST, but the Council must work in a harmonious manner to achieve a workable solution. The Bench said that as per Article 246A, both Parliament and the State legislature have equal power to legislate on matters of taxation.
"Article 246A treats Centre and State as equal and Article 279 of the constitution says that Centre and State cannot act independent of each other", it said. The top court said that recommendations of the GST council are a product of collaborative discussions between the Centre and States and it is not imperative that one of the federal units must possess a higher share. It said that Indian federalism is a dialogue between cooperative and non-cooperative federalism and the Centre and States always engage in dialogue.
The Bench pointed out that there are no provisions in the GST Act of 2017 that deal with repugnancy between the laws drawn up by the Centre and State and it is for the council to advise them suitably whenever such occasions come to fore. The top court ruling came on a batch of pleas as it upheld a Gujarat High Court verdict to quash the levy of Integrated GST (IGST) on the importers on ocean freight under reverse charge. The High Court 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 India. It had quashed the 2017 notification of the Centre by which IGST of five per cent would be levied on the services of transport of goods in a vessel.
The Supreme Court on Thursday ruled that GST Council's recommendations are not binding on the Centre and state governments.
A Bench headed by Justice DY Chandrachud said GST Council recommendations only have a persuasive value as India is a cooperative federalism, and the Centre and States have simultaneous powers to legislate on Goods and Service Tax (GST). The Bench emphasised that the GST Council must work in a harmonious manner to achieve a workable solution between Centre and state governments.
The top court said state governments and Centre can equally legislate on matters of GST, and all recommendations of the GST council are not binding on State legislature, but only have persuasive value. The top court said according to Article 246A, both Parliament and State legislature have equal power to legislate on matters of taxation. It added that Article 279 says State and Centre cannot act independent of each other and also points towards competitive federalism. The top court's judgment in the matter will be uploaded later in the day.
