The Government of India (GoI) introduced the GST Council to modify, regulate and reconcile the goods and services tax in India. The Council replace all the existing multiple taxation process and introduce new taxation methods to ease the taxation process for the taxpayers. The Council shall also monitor all the taxation process to provide support to the respective departments and to avoid the fraudulent process.

The Court pointed out that Article 246A, introduced through an amendment to the Constitution made in 2016, gives both Parliament and State legislatures the power to make laws relating to GST. The Constitution has not specifically mentioned that all GST Council decisions will become law.

To ensure that every State could play a part in decisions involving GST rates, exemptions, thresholds, relaxations and procedural issues, the GST Council was formed to decide on all these matters. The GSTC is headed by the Union Finance Minister and includes all State Finance Ministers. Decisions in GSTC are taken by a majority of not less than three-fourths of weighted votes cast. The Centre has one-third weightage of the total votes cast, and all the States taken together have two-thirds of the weightage of the total votes cast.

Recent Ruling

• The Supreme Court ruled that the recommendations of the GST Council are not binding on either the Centre or the States.

How it disrupts

The order has reminded the States that they can reject decisions made by the GST Council and set different rates for goods and services in their jurisdiction.

• If a State remains in the GST system, but sets higher tax rates on few goods and services. This will mean that taxpayers will be unable to claim the input tax credit on the goods outside GST, increasing their tax incidence. Taxpayers’ compliance burden for return filing will get very troublesome. Besides, higher tax rates will make the State less preferred by domestic and foreign companies.
• If the State moves out of the GST system completely, there will be complete chaos. Other States will not want to share their GST revenue with the breakaway State, thus bringing down its revenue share from the Centre. Inter-State business with the breakaway State will collapse and FDI will move away from the State.

The spirit of co-operative federalism is already entrenched in GST. The Court has not brought about any change to the law.  The States and the Centre need to keep the spirit going to ensure that the GST system functions. Despite having a brute majority, the Centre should pay heed to the problems faced by States and suggest corrective measures, whenever possible. The States should also desist from making preposterous demands without considering the problems in Central Government finances.

https://www.thehindubusinessline.com/blexplainer/will-sc-order-disrupt-the-functioning-of-the-gst-regime/article65453284.ece

How to structure

1. Give a brief intro about GST council
2. Briefly mention the recent SC ruling
3. Explain how the ruling disrupts the functioning of GST- focus in the negatives
4. Suggest measures
5. Conclude