GST recommendations not binding on Union and states: SC

In a significant verdict, the Supreme Court Thursday ruled that the recommendations of Goods and Services Tax (GST) Council are not binding on the Union and the states and only have a persuasive value.

The Supreme Court said that Parliament and state legislatures possess simultaneous power to legislate on GST and the recommendations of the council are the product of a collaborative dialogue involving the Union and states.

It said that the GST Council is not merely a constitutional body restricted to the indirect tax system in India but is also an important focal point to foster federalism and democracy.

A bench of justices D Y Chandrachud, Surya Kant and Vikram Nath rejected the Centre’s contention that the recommendations of the GST Council are binding on the legislature and the executive and said since the Constitution does not envisage a repugnancy provision to resolve inconsistencies between the central and state laws on GST, the GST Council must ideally function, as provided by Article 279A(6), in a “harmonised manner to reach a workable fiscal model through cooperation and collaboration”.

It said that the recommendations of the GST Council are not binding on the Union and States for the reasons that the “deletion of Article 279B and the inclusion of Article 279(1) by the Constitution Amendment Act 2016 indicates that the Parliament intended for the recommendations of the GST Council to only have a persuasive value, particularly when interpreted along with the objective of the GST regime to foster cooperative federalism and harmony between the constituent units”.