Supreme Court decision will not alter the way GST Council functions, says finance ministry

The Supreme Court’s decision on Thursday that the recommendations of the GST Council are not binding on the Centre and the state governments will not impact the functioning of the council in any manner, a finance ministry official told CNBC-TV18.

The official said the ministry will review the judgment in detail and said, “The Supreme Court has observed that while the recommendation of the GST Council has persuasive value for primary legislation, that is the framing of law, however, it is binding in so far as subordinate legislation is concerned issue of notification, framing of rules, prescribing rates and taxes, etc,” the official said.

The official said the GST Council, as prescribed in Article 279A of the Constitution, deliberates and makes recommendations to the Centre and states on issues such as model GST law, principles of levy, apportionment of GST levies on interstate supplies, principles relating to place of supply, GST rates and special provisions with respect to certain states.

“These recommendations are implemented by the Centre and states through normal legislative process under their respective Acts. The central and state Acts also specifically provide that levy, exemptions, and rules, etc, would be prescribed on the recommendation of the council through subordinate legislation. The recommendations of the GST Council are binding in so far as they relate to subordinate legislation, as has also been reiterated by the court,” the official said.

The official added that the Centre and states collaborate with each other and follow the GST Council’s recommendations, which have been arrived at with a consensus. “This has been the finest example of collaborative and cooperative federalism,” the official said.

“The Supreme Court has only elaborated this mechanism while making its observations. This judgment does not in any way lay down anything new in so far as the GST institutional mechanism is concerned; does not have any bearing on the way GST has been functioning in India, nor lays down anything fundamentally different to the existing framework of GST,” the official said.

With regard to the specific issue of GST levy on ocean fright, the official said, “The Supreme Court observed that since the Indian importer is liable to pay IGST on the ‘composite supply’, comprising of supply of goods and services of transportation, insurance, etc. in a CIF contract, a separate levy for the ‘supply of services’ by the shipping line would be in violation of Section 8 of the CGST Act,” the official clarified.

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