Ruling Of Supreme Court On GST Council - UPSC Current Affairs

Why in the News?

Recently, the Supreme Court of India (SC), held that Union and State legislatures have equal, simultaneous and unique powers to make laws on Goods and Services Tax (GST) and the recommendations of the GST Council are not binding on either the Union government or the states.

• The apex has rejected the Centre’s argument that the entire structure of GST would crumble if the Council’s mandates are not treated as enforceable.

Also, read our yesterday’s edition of the Current Affairs Dialog box in this linked article.

Probable Question:

What is Goods and Services Tax (GST)? Discuss the possible impact of the SC ruling on GST Council.

Image Source: The Hindu

Key Points

Background

• The apex court’s decision came while confirming a Gujarat High Court ruling that the Centre cannot levy Integrated Goods and Services Tax (IGST) on ocean freight from Indian importers.

Supreme Court Ruling

• The Supreme Court in a judgment championing the importance of “cooperative federalism” for the well-being of democracy, held that Union and State legislatures have “equal, simultaneous and unique powers” to make laws on Goods and Services Tax (GST) and the recommendations of the GST Council are not binding on them.
• The recommendations of the GST Council are the product of a collaborative dialogue involving the Union and the states.
• They are recommendatory in nature. The recommendations only have a persuasive value. 
• To regard them as binding would disrupt fiscal federalism when both the Union and the states are conferred equal power to legislate on GST.
• The court emphasized that Article 246A of the Constitution treats the Union and the States as “equal units”.
  • Article 246A of the Indian Constitution gives the States the power to make laws with respect to GST.
  • Article 279A (constituting the GST Council) envisions that neither the Centre nor the states are actually dependent on the other.

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Impact of Court Ruling

• This judgement may change the landscape of those provisions under GST which are subject to judicial review.
  • This is because the constitutionality of such provisions can be challenged based on GST Council recommendations.
• The judgment also resolved a prolonged battle the government has been raging against companies to implement its IGST on ocean freight on reverse charge basis.
• The decision will foster the spirit of cooperative federalism by emphasizing the importance of cooperative federalism as a vital component of democracy's well-being.

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