Fears of derailing GST are far-fetched

The Supreme Court’s ruling that the recommendations of the Goods and Services Tax (GST) Council have persuasive value, and are not binding on the Union and states, is consistent with the constitutional framework of GST. It reiterates the core tenet that the ultimate authority to make law rests on the Parliament and state legislatures.

Fears that the ruling will derail the landmark reform to create a seamless common market — if states do not stick to the GST Council’s recommendations — seem far-fetched. The constitutional amendment that ushered the GST regime in July 2017 by subsuming multiple indirect taxes and levies, created a GST Council and allowed states to tax services and the Centre to tax the retail sale of goods.

Uniform taxation of goods and services, and the seamless integration of the input tax credit chain made India a common national market, with the Centre and states pooling in sovereignty. As an executive body, the council can provide guidance to legislatures to enact GST laws for a harmonised structure of GST. The remarkable distance the federal polity has travelled is thanks to the collaborative work done by the GST Council.

The court held that the Constitution Amendment Act 2016 vests Parliament and state legislatures with the concurrent power to make GST laws. It observed that if the council was intended to be a decisionmaking authority whose recommendations transform to legislation, such a qualification would have been included in the amendment. While the council has persuasive value for primary legislation, the court has acknowledged that its recommendations are binding on the government in so far as subordinate legislation is concerned. It includes prescribing tax rates to give effect to a uniform tax system. This is in sync with the existing law.

The ruling also says the GST Council must function in a harmonised way to reach a workable fiscal model through cooperation, and that it is a focal point to foster federalism and democracy. This, indeed, calls for yet more engagement with the states.


Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.