The Supreme Court’s decision on the GST Council’s recommendations only “developed” its methodology; it will have no impact on the current framework

The Supreme Court's decision on the GST Council's recommendations only "developed" its methodology;  it will have no impact on the current framework

Following the Supreme Court’s ruling that the GST Council’s recommendations are not binding on the Centre and states, government sources said on Thursday that the ruling has no bearing on how GST has been implemented in India and does not establish anything fundamentally different from the current framework. “While making its observations, the Supreme Court only enlarged on this mechanism.

It is thus amply clear that the top court has elaborated upon the constitutional scheme concerning GST. As prescribed in Article 279A, the Council makes recommendations to the Union and the States on issues such as model GST law, principles of levy, apportionment of GST levies on interstate supplies, and principles relating to place of supply, GST rates and special provisions with respect to certain States.

This judgement does not establish anything new in terms of the GST institutional structure, has no influence on how GST has been implemented in India, and does not establish anything substantially different from the existing GST framework “sources claimed. The top court said that the Centre and state legislatures possess equal powers to legislate on GST, while also upholding the judgement of the Gujarat High Court in the Ocean Freight matter in the case of Mohit Minerals.

These recommendations of the Council are implemented by the Centre and States through normal legislative processes under their respective Acts. The Central and State Acts also specifically provide that levies, exemptions, rules etc. would be prescribed on the recommendation of the Council through subordinate legislation, the sources said.

As the specific issue involved in the matter relating to GST levy on the ocean freight, the Court observed that since the Indian importer is liable to pay IGST on the ‘composite supply’, comprising of supply of goods and supply of services of transportation, insurance, etc. in a CIF 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 government sources further informed that the GST has been working on this collaborative institutional mechanism with consensus. “There has been only a solitary instance where the council took a decision by voting and even in this case the dissenting states implemented the decision of GST Council. The decisions have been taken with consensus. This has been the finest example of collaborative and cooperative federalism,” sources added.

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