The weight of the GST Council ruling

News: Recently, the SC in Union of India Anr. vs Mohit Minerals Pvt. Ltd., ruled that the recommendations of the GST Council are not binding on either the Union or the States.

Some States have rejoiced over the ruling. They believe that this has restored the autonomy of States to legislate on GST.

The SC’s observation in Mohit minerals case

As per Article 246A, the Union and State governments can simultaneously legislate on the GST (except the IGST, which is in the legislative domain of the Union government).

There is no repugnance provision to resolve inconsistencies between the Central and State laws on GST in the constitution. Therefore, the GST Council must function in a harmonised manner to reach a workable fiscal model through cooperation and collaboration, as provided by Article 279A(6).

The GST Council functions under Article 279A. It is a platform to bring the Union and State governments together to promote cooperative federalism.

Debates over the Constitutional Amendment Bill 2011 

In 2013, the Attorney General submitted to the Standing Committee on Finance that the powers of the legislature over the Finance are sacrosanct. The powers will not be affected by the setting up of the GST Council. However, the issue of conflict between the Union and State governments has to be resolved on a platform such as the GST Council.

The Government response after judgment

The Government of India iterated that ruling reiterates the scheme of things in the constitution and the GST laws. The council will continue to work in future the way it has worked in the last 5 years.

It means the Union government is in agreement with this ruling. There is no question of law in this regard.

What are the issues in the GST Council? 

There is an imbalance in the voting rights between the Union and State governments. Therefore, there is an automatic veto power in the hand of the union government because a resolution can be passed with at least three-fourths of the weighted votes.

This makes democratic decision-making difficult. Although all the States has equal weight for their votes, but smaller states having lesser economic stakes can be easily influenced by interest groups.

The GST Council debates are more on political lines rather than on the economics of taxation;

The States have not got full compensation for the shortfall in GST revenue collection during the COVID-19 pandemic period. The states wanted to extend GST compensation beyond June 2022 given the current recession, but there is lack of consensus on it.

Way Forward

There should be a healthy contestation in a federation. A balance should be carried out between the autonomy of legislatures and compromise for obtaining a harmonised commodity tax system.

In a cooperative federalism, there is no space for one-upmanship in either of the two tiers of the Indian federal government.

The GST Council shall be guided by the need for a harmonised structure of GST and for the development of a harmonised national market for goods and services”.

The GST Council’s recommendations are non-qualified and have the force of persuasive value.

The power of the recommendation’s rests on the practice of cooperative federalism and collaborative decision-making in the Council.

In a democracy, the power to legislate is given to Parliament/Assembly by its people. John Locke said, “The legislature cannot transfer the power of making laws to any other hands because it has been delegated from the people”

Source: The post is based on an article “The weight of the GST Council ruling” published in the “The Hindu” on