Recommendations of GST Council binding in framing rules: Govt sources

While the recommendations of the Goods and Services Tax Council have a persuasive value for framing of laws, they are binding when it comes to framing rules, prescribing rates and taxes under the GST regime, according to  government sources.

The Centre is currently reviewing the Supreme Court judgement on Mohit Mineral matter with respect to taxability on ocean freight. Sources said the apex court had elaborated on the "constitutional scheme" concerning GST.

As prescribed in Article 279A, the Council inter alia 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 arrived at after deliberation in the GST Council in which all states participate,'' another source said.

He added that those 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 SC in its order, sources clarified.

The GST has been working on this collaborative institutional mechanism, where the Centre and states follow the recommendations of the Council, which have been arrived at with consensus.

There has only been a solitary instance where the Council took a decision by voting and even in this case the dissenting states implemented the decision of the GST Council. In all other instances, the decisions have been taken with consensus, one of the sources said. This has been the finest example of collaborative and cooperative federalism, he added.

The court has only elaborated this mechanism while making its observations, according to the people quoted above. ‘’This judgement 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.’’

On the specific issue related to GST levy on ocean freight, the top court observed that since the Indian importer is liable to pay IGST (Integrated GST) on the ‘composite supply’, comprising supply of goods and supply of services of transportation, insurance, etc. in a CIF contract, a separate levy on the Indian importer for the ‘supply of services’ by the shipping line would be in violation of Section 8 of the CGST (Central GST) Act.