GST Council recommendations not binding

Why in news?

• The Supreme Court ruled that recommendations of the Goods and Services Tax (GST) Council only have persuasive value, and cannot be binding on the Centre and states.

Highlights from the Supreme Court judgment on GST:

• Recommendations of GST council is recommendatory in nature:
  • The recommendations of the GST Council are the product of a collaborative dialogue involving the Union and States. They are recommendatory in nature. To regard them as binding would disrupt fiscal federalism where both the Union and the States are conferred equal power to legislate on GST.
• Union and States have simultaneous power for enacting laws on GST:
  • If the GST Council was intended to be a decision-making authority ??whose recommendations are binding, such a qualification would have been included in Articles 246A or 279A.
  • Instead, Article 246A (which gives the States power to make laws with respect to GST) of the Constitution treats the Union and the States as “equal units”.
  • Moreover, Article 279A in constituting the GST Council, envisions that neither the Centre nor the states are actually dependent on the other.
  • It confers a simultaneous power (on Union and States) for enacting laws on GST.

Constitutional provisions related to GST:

• Article 246A - Special Provision for GST:
  • This Article give power to the Parliament and the respective State Legislatures to make laws on GST respectively imposed by each of them.
  • However, the Parliament of India is given the exclusive power to make laws with respect to inter-state supplies (IGST).
  • Further, the article excludes some products (Petroleum Crude, High-Speed Diesel, Motor Spirit, Natural Gas, Aviation Turbine Fuel) from the scope of GST until recommended by the GST Council.
• Article 269A - Levy and Collection of GST for Inter-State Supply:
  • While Article 246A gives the Parliament the exclusive power to make laws with respect to inter-state supplies, the manner of distribution of revenue from such supplies between the Centre and the State is covered in Article 269A.
  • It allows the GST Council to frame rules in this regard.
  • Import of goods or services will also be called inter-state supplies. This gives the Central Government the power to levy IGST on import transactions.
• Article 279A - GST Council:
  • This Article gives power to the President of India to constitute a joint forum of the Centre and States called the GST Council, consisting of:
    • Union Finance Minister - Chairperson
    • The Union Minister of State, in-charge of Revenue of finance - Member
    • The Minister in-charge of finance or taxation or any other Minister nominated by each State Government - Members
  • The GST Council is an apex committee to modify, reconcile or to make recommendations to the Union and the States on GST, like the goods and services that may be subjected or exempted from GST, model GST laws, etc.
  • Decisions in the GST Council are taken by a majority of not less than three-fourth of weighted votes cast.
  • Centre has one-third weightage of the total votes cast and all the states taken together have two-third of weightage of the total votes cast.
  • All decisions taken by the GST Council have been arrived at through consensus.

PRACTICE QUESTION:

Consider the following statements:

1. Recommendations of the GST Council only have persuasive value, and cannot be binding on the Centre and states.

2. Decisions in the GST Council are taken by a majority of not less than three-fourth of weighted votes cast.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer