[Answered] Highlight the implications of ‘Mohit Minerals’ judgment on the fiscal federalism of India.

Recently, the Supreme Court ruled that the recommendations of the Goods and Services Tax (GST) Council only have persuasive value and cannot be binding on the Centre and states. The case- Union of India vs Mohit Minerals Pvt Ltd was dealing with the levy of Integrated Goods and Services Tax (IGST) on ocean freight. The Supreme Court held that the levy constituted double taxation as the importer, which was already paying tax on the composite supply of goods, could not be asked to pay an additional tax on a perceived service that it may have received. 

Implications on fiscal federalism: 

• It would be counterproductive to the objective of the GST Act i.e. One Nation, One Tax, as it may give way to a few States to legislate their own tax laws that run counter to the Central GST Law. 
• Union and State legislatures have “equal, simultaneous and unique powers” to make laws on Goods and Services Tax (GST).  
• The state legislatures have the right to deviate from any advice given by the GST Council. In the process, states can make their own laws by emphasizing their role as equal partners in the federal architecture of India. 
• While the decision in Mohit Minerals does not give State governments unilateral powers of taxation, it sends a message to the GST Council to listen to all voices including those of protest. The States’ powers to tax may not extend to items outside the GST Act. 

• It held that both the Parliament and the state legislature had equal power to legislate on the Goods and Services Tax (GST). 

The Centre could strive to be more conciliatory towards States’ concerns and fiscal dilemmas. The States should have the right to dissent in the Council and their voice should not be drowned in due to unanimity in decision-making.