All about GST Verdict by Supreme Court

The Supreme Court has dashed the misconception of GST is one-nation-one-tax. It

mentioned the difference between legislative intent and its codification into law.
And as usual the draftsman would be blamed for this goof up however heads ought
to roll on the political level. Select committee of the Parliament that tested the law
is guilty of shoddy work. The Supreme Court held that the recommendations by
the GST Council were not binding and satisfactory on the central and state
governments and that they only had a persuasive value. The apex court said that
the Parliament and state legislatures could equally legislate and make rules on GST
and also said the impugned levy imposed on the 'service' aspect of the transaction
is in violation of the principle of 'composite supply' enshrined under Section 2(30)
read with Section 8 of the CGST Act. The bench was headed by Justice
Dhananjaya Y Chandrachud, which interpreted the pertinent legal provisions to
further hold that the recommendations of the GST Council are not binding on the
Centre and states, and that such recommendations only have a persuasive value.
This is a landmark judgment that blows to smithereens the first of the twin USPs of
the nascent law — "One Nation, One tax" and cease to the monstrosity of tax-on-
tax, aka, cascading effect. The Supreme Court upheld the Gujarat High Court
verdict that quashed the IGST on ocean freight paid by the importers and thus
saved the Gujarat importers from its purview. 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. “The Union and states have
simultaneous powers to legislate on GST and the Constitution does not envisage a
repugnancy provision and GST council must work in a harmonious manner to
achieve a workable solution," the court said. Can the verdict lead to confusion and
chaos if states refuse to accept the council’s decisions or recommendations?
Sushil Modi said that no state can afford to not implement GST and no state has
ever disregarded a decision taken in consensus by the council. “We are united by
trade. The state that will not accept GST will bear the loss. For example, Tamil
Nadu goods are consumed in Bihar and if Bihar won’t get that tax, it will stop
trading with Tamil Nadu," he explained. The Rajya Sabha lawmaker cited an
exception where Kerala asked for voting on the issue of including lottery under
GST and the state had to accept the percentage of tax fixed by the council. The
council prescribes rates and revises them, besides taking a call on what goods and
services should be left out of GST. The bench said that as per Article 246A, both
Parliament and state legislatures have equal power to legislate on matters of
taxation. The bench also waxed eloquent over the federal spirit - states are not
obliged to toe the Centre's line. States’ interests and rights cannot be subjugated by
those of the Centre. By the way, if the SC view is allowed to hold sway, there
would be no letup in the Centre and states piling up revenue by imposing heavy
state sales tax on gas, diesel and petrol, should petroleum products be brought
under GST.
The judgement has met with a flurry of responses from economists and policy
planners. Here’s a look at what some experts have to say about the ruling. 

K.N. Balagopal, Finance Minister of Kerala 

“My initial understanding about the verdict is that this is a positive
development. And we have to read the full text later. Actually, the GST law,
from inception itself, is against the interest of federalism. This order under the
ambit of cooperative federalism has upheld the freedom of the states in
taxation which was important,” Balagopal said.
Mahesh Jaising, Partner, Deloitte India
“The decision of the apex court is a welcome judgment for industry as it has struck
down the levy of GST on freight incurred by Indian importer for import of goods.
It is important to note that the court has also held that GST Council decisions are
only recommendatory in nature and hold only persuasive value. This would have
far reaching implications on various other matters where the States are not in
agreement with the decisions of the GST Council, especially in light of the
compensation period coming to an end in June. This area would need to be closely
looked out for,” Jaising said.
-By Yashi
(yashikumari.yk@gmail.com)