GST compensation row: States may seek 3-member dispute resolution body

2011 Bill outlined such a structure, but it was not included in Act

Rejecting both options presented by the Centre for goods and services tax (GST) compensation, dissenting states are likely to press for a model incorporated in the Constitution Amendment Bill of 2011 for setting up a dispute resolution authority at the upcoming GST Council meeting on Monday.
 
The Bill had proposed a model for setting up a three-member dispute resolution body. With at least 21 states picking one of the two options presented by the Centre, voting might not be of significance for opposing states. The dispute settlement structure may be in the form of a body led by a former justice of the Supreme Court or former chief justice of a high court. The other two members could be eminent persons picked by the Council.
 
Punjab Finance Minister Manpreet Singh Badal said the opposing states will pitch for activation of the dispute resolution mechanism on urgent basis and selection of a vice-chairman of the Council from among the states.
 
“In a healthy federal political system, these kinds of disputes are bound to arise. But how can the Centre say ahead of the meeting that they have 21 votes and we have only 10,” said Badal. “All that Punjab is trying to say is, activate the dispute resolution system. It can’t be your word against my word. We want the dispute to be settled under the mechanism, which is provided in the Act.” 
 
The 101st Constitution Amendment Act provides that the GST Council shall establish a mechanism to adjudicate any dispute between the Centre and one or more States arising out of the recommendations of the Council or implementation thereof. However, it does not outline the structure of the body, making its operationalisation time consuming.
 
Kerala Finance Minister TM Thomas Isaac had earlier said they might accept a proposal in the interim and have the issue examined under the mechanism. The Bill had provided that the two other members of the GST Dispute Settlement Authority shall be persons of proven capacity and expertise in the field of law, economics or public affairs to be appointed by the President on the recommendation of the GST Council.
 
Sumit Dutt Majumder, former chairman of the then central board of excise and customs, said the Council may consider putting in place the mechanism on the lines recommended in the earlier version of the Bill. “The current law indeed provides for a dispute resolution body, but the structure isn’t defined. Hence, the Council may refer to the three-member structure provided in the earlier version and operationalise it,” he said.
 
Majumder said the compliance burden of compensating states stands with the Centre.
 
Haseeb Drabu, who was the finance minister of Jammu and Kashmir at the time of GST’s implementation, said the failure to set up a dispute resolution mechanism three years after implementation of the system is a failure of both the states and the Centre.
 
S S Ahluwalia, Supreme Court advocate, said in the absence of a provision for a dispute resolution authority, the only option available with the states is to challenge the orders or notification by the Centre.

WHAT THE ACT SAYS

The Constitution Amendment Act provides that the Goods and Services Tax Council shall establish a mechanism to adjudicate any dispute —

(a) between the Centre and one or 

more states; or

(b) between the Centre and any state or states on one side and one or more other states on the other side; or

(c) between two or more states, arising out of the recommendations of the Council or implementation thereof

Structure of dispute resolution body proposed in the 115th Constitution Amendment Bill of 2011:

1. A three-member dispute settlement body 

2. Chaired by a retired Supreme Court judge or chief justice of a high court

3. The remaining two members can be eminent persons that are subject experts