GST Council Recommendations Not Binding On Parliament & State Legislatures : Supreme Court

In a significant verdict, the Supreme Court on Thursday held that the recommendations of the GST council are not binding on the Parliament and State Legislatures.Though some of the recommendations of the GST council are binding on the Union and State Governments in relation to tax rate and taxable goods etc., by virtue of the provisions of the GST Act, it cannot mean that all recommendations are binding on the Parliament and the State Legislatures. "Even if it is Parliament that has enacted laws making the recommendations of the GST Council binding on the Central Government for the purpose of notifying secondary legislations, it would not mean that all the recommendations of the Council made by virtue of its power under Article 279A have a binding force on the legislature", the Court said.A bench led by Justice DY Chandrachud held that the Parliament intended that the recommendations of the GST Council will have persuasive value.Importantly, the Court held that both the Parliament and the State Legislatures can equally legislate on matters of Goods and Service Tax."The 'recommendations' of the GST Council are the product of a collaborative dialogue involving the Union and States. They are recommendatory in nature. To regard them as binding edicts would disrupt fiscal federalism, where both the Union and the States are conferred equal power to legislate on GST", the Court stated in the judgment."It is not imperative that one of the federal units must always possess a higher share in the power for the federal units to make decisions. Indian federalism is a dialogue between cooperative and uncooperative federalism where the federal units are at liberty to use different means of persuasion ranging from collaboration to contestation", the Court added."Article 246A which was introduced by the Constitution Amendment Act 2016 vests the Parliament and the State legislatures with the concurrent power to make laws with respect to GST", the judgment stated(paragraph 26)."If the GST Council was intended to be a decision-making authority whose recommendations transform to legislation, such a qualification would have been included in Articles 246A or 279A. Neither does Article 279A begin with a non-obstante clause nor does Article 246A provide that the legislative power is 'subject to' Article 279A.", the bench further observed(Para 54).There would have been express provision in Constitution if GST Council recommendations were meant to be binding"If the GST Council were intended to be a constitutional body whose recommendations transform into legislation without any intervening act, there would have been an express provision in Article 246A. Article 279A does not mandate tabling the recommendations in the legislature like the provisions in category 3, where the recommendations have to be mandatorily tabled in the legislature along with an explanatory note. Only the secondary legislation which is framed based on the recommendations of the Council under the provisions of the CGST Act and IGST Act is mandated to be tabled before the Houses of the Parliament. The use of the phrase 'recommendations to the Union or States' indicates that the GST Council is a recommendatory body aiding the Government in enacting legislation on GST", the judgment stated in paragraph 56. GST Council's recommendations binding on Government's rule making power; but not on legislative powerThe Government while exercising its rule-making power under the provisions of the CGST Act and IGST Act is bound by the recommendations of the GST Council. However, that does not mean that all the recommendations of the GST Council made by virtue of the power Article 279A (4) are binding on the legislature's power to enact primary legislations.The Court noted that express provisions have been made when the Parliament intended that the Council Recommendations should be binding as regards the rule-making power of the Governments.For example, Section 5 of the IGST Act provides that the taxable event, taxable rate, and taxable value shall be notified by the government on the "recommendations of the Council". Likewise, the power of the Central Government to exempt goods or services or both from levy of tax shall be exercised on the recommendations of the GST Council under Section 6 of the IGST Act. Section 22 provides that the Government may exercise its rule making power on the recommendations of the GST Council. The CGST Act also provides for similar provisions in Sections 9, 11 and 164.Merely because a few recommendations of GST council are binding on the Government under provisions of CGST and IGST Act, it cannot be argued that all recommendations are bindingThe fact that few recommendations of GST Council are binding as regards the tax rates, taxable events etc, it cannot mean that the all recommendations of GST Council are binding on the legislative powers."59. The provisions of the IGST Act and CGST Act which provide that the Union Government is to act on the...

GST Council Recommendations Not Binding On Parliament & State Legislatures : Supreme Court

Manu Sebastian

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