The Supreme Court on Thursday held that the recommendations of the GST Council are not binding on the Union and state governments, saying the Parliament intended that the recommendations of the body will have persuasive value.
The apex court also ruled that the Centre and states have simultaneous powers to legislate on the Goods and Services Tax (GST) and the council must work in harmonious manner to achieve workable solution between Centre and states.
The bench stated that Article 279A of the Constitution does not begin with a non-obstante clause and Article 246A does not envisage a repugnancy provision.
Making crucial observations on cooperative federalism, the court said while the Indian Constitution provides Union government higher share of power to avoid chaos, relation between two constitutional units may not always be collaborative.
GST recommendations are meant for “collaborative discussion” and it is not “imperative that one of the federal units must always possess a higher share,” read the judgement which is likely to have a significant impact on the contentious issue.
“Indian federalism is a dialogue between cooperative and non-cooperative federalism. Indian federalism is a dialogue in which States and Centre always engage in a dialogue,” the court said.
The court ruling came while upholding a 2020 decision of the Gujarat High Court to quash the levy of Integrated Goods and Services Tax (IGST) on the importers on ocean freight under reverse charge, Hindustan Times reported.
In Mohit Minerals Pvt Ltd Vs Union of India, the Gujarat HC held that no tax is leviable under the IGST Act, 2007, on the ocean freight for the services provided by a person located in a non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India. The levy and collection of tax of such ocean freight under the impugned Notifications is not permissible in law, said the high court.
The central government introduced the Notification No.8 of 2017 – ITax (Rate) in June 2017 notifying that the IGST at the rate of 5% will be leviable on the service of transport of goods in a vessel. This notification was quashed by the high court.
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