Centre working on mechanism to resolve GST disputes with states: Report

The finance ministry is working on the procedures of the GST dispute resolution mechanism as some of the states have been demanding

In order to resolve goods and services tax (GST) disputes with the states, the Ministry of Finance is planning to bring out a mechanism which will be discussed during the GST Council meeting in June, a media report said on Tuesday.

According to the Economic Times report, a panel with representatives from states, central government and independent legal experts to discuss implications, will be formed. Detailed guidelines will be in check prior to that to know which cases can be referred to the Dispute Redressal Bench, as the report said.

The ministry is working on the procedures of the dispute resolution mechanism as some of the states have been demanding, the ET report quoting an official said, adding that once the draft is ready, it will be taken up to the Council.

As per rules, there is a provision for voting in the GST legislation to resolve disputes in which the Centre has a one-third vote while states make up the remaining two-thirds. While voting, a decision must be passed or rejected by a majority of at least three-fourths of the weighted votes of members present.

Before this, the Council has usually set up groups of ministers to address differences among states and over the past five years, the disputes have been resolved by consensus except one, which the council decided by vote.

From July 1, the central government may expect more disputes when the GST compensation lapses and states start to look for ways to make up for the revenue loss.

The development came after the Supreme Court on May 19 ruled that recommendations made by the GST Council are not binding on the Centre and the states.

The ruling in a case relating to the levy of integrated GST on ocean freight imports has sparked greater urgency to the search for a dispute settlement mechanism.

"GST Council is a product of collaborative discussion. It is not imperative that federal units must always possess a higher share," the apex court had said.