The Supreme Court on May 19 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 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.
- Now, Indian importers will not have to pay the 5 per cent integrated goods and services (IGST) levy on shipping charges known as ocean freight. Indian importers are liable to pay IGST on the “composite supply”, comprising supply of goods and supply of services of transportation, insurance, etc, in a CIF (cost, insurance, freight) contract . A separate levy on the Indian importer for the “supply of services” by the shipping line would be in violation of Section 8 of the CGST Act,” the Apex court said.
- The recommendations of the GST Council are the product of a collaborative dialogue involving the Union and the States, says the Supreme Court. 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 Supreme Court emphasised that Article 246A (which gives the States power to make laws with respect to GST) of the Constitution treat the Union and the States as “equal units”.
- The act confers a simultaneous power (on Union and States) for enacting laws on GST. Article 279A, in constituting the GST Council, envisions that neither the Centre nor the States are actually dependent on the other.
What the judgement says?
- Recommendations of the GST Council are not binding on the Union and States, but only have a persuasive value.
- Recommendations of the GST Council, the product of a collaborative dialogue involving the Union and States.
- All the recommendations of the GST Council made by virtue of the powers under Article 279A (4) are not binding on the legislature’s power to enact primary legislations.
- Centre and States have equal powers to legislate on GST.
- The Council must work in a harmonious manner to achieve a workable solution.
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