New Delhi: The Supreme Court on Thursday said the recommendations of the Goods and Services Tax (GST) Council are not binding on the Center and states, though they are important to consider. The top court said that both Parliament and state legislatures have the power to make laws on GST and the recommendations of the council are the result of a collaborative dialogue between the Center and the states.
The Court observed that the GST Council is not just a constitutional body confined to the indirect tax system, but also an important focal point for promoting federalism and democracy. A bench of Justices DY Chandrachud, Surya Kant and Vikram Nath rejected the Centre's contention that the recommendations of the GST Council are binding on the legislature and the executive.
The bench also said that the central and state governments have powers to make laws on GST but the council should work in a cohesive manner to achieve a workable solution. The court said that according to Article 246A, the Parliament and the state legislature have equal powers to make laws on matters of taxation. Under Article 246A, the Center and the State have been treated equally, while Article 279 states that the Center and the States cannot function independently of each other.
The bench said that there is no such provision in the GST Act of 2017 which deals with the conflict between the laws of the Center and the states and whenever such circumstances arise, the council gives appropriate advice to them. The court gave this decision while upholding a decision of the Gujarat High Court.
A Gujarat court had held that the Integrated GST (IGST) cannot be levied on importers for marine goods under 'reverse charge'. The bench said that the recommendations of the GST Council are not binding on the Center and the states for the reason that the removal of Article 279B and the insertion of Article 279(1) by the Constitution Amendment Act 2016 indicates that the intention of the Parliament was to make the recommendations. . The GST Council is just a motivator, as the GST regime was intended to promote cooperative federalism. The bench observed that fiscal federalism is one of the important features of Indian federalism and the statement of objectives and reasons for the 2014 Amendment Bill, parliamentary reports and speeches indicate that Articles 246A and 279A of the Constitution provide for cooperative federalism between states and the Centre. were introduced with the aim of promoting harmony.
In a 153-page judgment penned by Justice Chandrachud, the bench observed that the Center has a unanimous vote in the GST Council and also the absence of an adverse provision in Article 246A shows that the recommendations of the GST Council cannot be binding. .
The judgment further said, "Therefore, the argument that if the recommendations of the GST Council are not binding, the entire structure of GST will collapse, it is not sustainable.