Revenue Secy to Study SC Judgement on Ocean Freight

The Supreme Court ruling on the goods and services tax framework is unlikely to materially impact the one-nation-one-tax regime, as it is only a reiteration of the existing law that gives states the right to accept or reject the GST Council's recommendation on taxation, revenue secretary Tarun Bajaj said.

"In this judgement, there is nothing new or which has not been discussed," Bajaj told reporters on Thursday, 19 May 2022.

On Thursday, the Supreme Court held that the recommendations of the GST Council were not binding on the central and state governments and that they only had a persuasive value. The apex court said Parliament and state legislatures could equally legislate on GST.

India rolled out the GST regime in 2017, following a constitutional amendment by subsuming nearly one-and-a-half-dozen central and state levies. The amendment provided for the creation of a council with representation from the Centre and states for decision-making.

The recommendations of the GST Council, as per the constitutional amendment, were always a guidance and never a mandatory compliance, Bajaj said.

States, even though they had at times differed on tax rates on a particular good or service in the council, never went back and framed legislations that were not in line with the panel's recommendations.

A government official, who did not want to be named, said while these recommendations were implemented by the Centre and states through normal legislative process under their respective Acts, the recommendations were binding in so far as they relate to subordinate legislation, as had also been reiterated by the Supreme Court in its order.

"The GST law says that the council will recommend ... It has nowhere said that the council will mandate," Bajaj said. The council is an executive body, created by a constitutional amendment, which recommends and based on its recommendations GST laws have been created, he added. "This is the scheme of things," he said.

Bajaj said in the last five years, even on issues which states did not agree on and gave a dissenting note, they promulgated the recommendations made by the council.

Asked about the revenue department's next move, Bajaj said the judgement was in the context of the tax on ocean freight and it was too early to say what would be a broader implication as the department was yet to go through the full judgement. The SC dismissed an appeal by the Centre against a Gujarat High Court judgement that said integrated GST on ocean freight was unconstitutional.