GST council's recommendations not binding on Centre, state governments: Supreme Court

The bench emphasised that the GST council must work in a harmonious manner to achieve a workable solution between Centre and state governments.

Urvi MahajaniUpdated: Thursday, May 19, 2022, 11:31 PM IST
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Supreme Court | Photo: PTI

In a significant ruling, the Supreme Court held on Thursday that the GST Council recommendations are not binding on the Union and the state governments. It further held that Parliament had intended that the recommendations of the GST Council will have ‘persuasive’ value.

A division bench headed by Justice D Y Chandrachud said that it was for the GST Council to suitably advise the Central government and the state governments. The Parliament and state legislatures have simultaneous powers to legislate on the Goods and Service Tax (GST). It further said that the recommendations of the GST Council were based on collaboration. Hence, the GST council must work in a harmonious manner to achieve a workable solution between Centre and states, the court said.

Further, the court said that the role of the GST Council is significant but it does not pass a resolution unanimously. It must ideally function in a harmonised manner. The federal system needs harmonised work, it added. All units in a federal system depend on each other, even if they are autonomous, the court said.

Reading out the operative part of the judgment, Justice Chandrachud read: “The recommendations of the GST council are a product of collaborative discussion. It is not imperative that one of the federal units must always possess a higher share.”

According to the ruling, Article 279A of the Constitution does not begin with a non-obstante clause and Article 246A does not envisage a repugnancy provision. Indian federalism is a dialogue in which the state and Centre always engage in a dialogue, the bench stated in a judgment which emphasized the importance of the principles of ‘cooperative federalism’.

In its 153-page judgment, the SC said: “Democracy and federalism are interdependent on each other. The Indian Constitution, though necessarily federal, provides the Union a higher share of power to avoid chaos but the relation between the two constitutional units may not always be collaborative. Indian federalism is a dialogue in which the state and Centre always engage.”

The SC verdict came while upholding the judgment of the Gujarat high court in the Ocean Freight matter in the case of Mohit Minerals. The Gujarat HC had quashed the levy of IGST on ocean freight under reverse charge in the case of Mohit Minerals Private Limited.

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