Kerala Finance Minister KN Balagopal on Thursday, May 19, hailed the Supreme Court verdict that the Goods and Services Tax (GST) Council's recommendations are not binding on states, saying the ruling upholds the federal rights of the states and people. In its order, the court said the Council's recommendations are not binding on the Union and states, but have a persuasive value as the country has a cooperative federal structure. A Bench of Justices DY Chandrachud, Surya Kant and Vikram Nath also held that the Union and state governments have simultaneous powers to legislate on GST but the Council must work in a harmonious manner to achieve a workable solution.
Welcoming the order, Balagopal, a critic of the GST structure, said in a series of tweets that the apex court's judgement on "powers of GST Council on taxation and state government's rights is a landmark one." "I am yet to see the full verdict. But it is clear from the reports that it is a verdict that upholds the federal rights of States and the people", Balagopal said, adding that his party CPI(M) had always been sceptical about the role of the GST Council.
Recalling his days as a member of the Rajya Sabha, the CPI(M) leader said as a member of the select committee of the Upper House that studied the GST Bill, he was of the opinion that GST is an “attack on federalism”. "We always maintained that there should be no taxation without representation...," the minister tweeted.
The Supreme Court, in the order, said that as per Article 246A, both Parliament and the state legislative assemblies have equal power to legislate on matters of taxation. "Article 246A treats the Union government and states as equal and Article 279 of the Constitution says that Centre and State cannot act independent of each other," it said.
The top court also said the recommendations of the GST Council are a product of collaborative discussions between the Union government and the states, and it is not imperative that one of the federal units must possess a higher share.
The top court ruling came on a batch of pleas as it upheld a Gujarat High Court verdict to quash the levy of integrated GST (IGST) on the importers on ocean freight under reverse charge. The High Court had held that no tax can be levied under the IGST on the ocean freight for the services provided by a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station in India.
It had quashed the 2017 notification of the Union government by which IGST of 5% would be levied on the services of transport of goods in a vessel.