A Timely Reminder: The Hindu Editorial on Supreme Court’s GST Verdict

Delivering its verdict on a longstanding dispute over levying the Goods and Services Tax (GST) on sea freight charges paid by importers, the Supreme Court on Thursday said such a tax was untenable. Its 153-page judgment also discussed in detail the nature of the recommendations of the GST Council, a constitutional body set up to oversee the operation of the indirect tax regime. Invoking the spirit of cooperative federalism, the Court has held that both Center and state legislatures have “equal, simultaneous and unique powers” to make GST laws, and the recommendations of the Council, where they have one-third and two-thirds of the voting shares respectively, are not binding on them. Amending the constitution to pave the way for a tax system incorporating multiple central and state duties, Parliament intended for the Council’s recommendations to have only ‘a persuasive value’, according to the Court. This has given rise to fears that individual states may begin to veto the Council’s recommendations, which they do not agree with, and refuse to implement them, thus building the ‘one nation, one tax’ building of a reform. There is a danger which took years to bring. Opposition ruled states have appreciated the decision while maintaining their rights. face to face What some called the “arbitrary imposition” of the Centre’s decisions in the council. Finance Ministry tried to allay the concern By pointing out that the Court has only elaborated on the existing arrangement of the Council and the status quo shall prevail. It added that states can already overrule the decisions of the council but so far no one has chosen it.

While North Block conducts a detailed review of the decision, it is pertinent that it argued that if the council’s recommendations were not binding, it would lead to a deadlock and collapse the entire GST structure. There is no water in it, the court said. That the tax notified two days before the commencement of the GST regime has been scrapped, as if it is on the verge of completing five years, is perhaps, an accidental nudge for introspection on its journey and way forward. At the very least, it could trigger further rivalry in council meetings, and at best, create a new sense of responsibility among the members. The Center may try to be more responsive to the concerns and fiscal dilemmas of the states, especially as their assured compensation clock closes next month, instead of tackling the thorny conditions with the tacit support of NDA-ruled states in the council. Look for a bulldozer. The Council should meet more frequently to nurture the critical fiscal federalism dialogue in the right direction and reduce the confidence deficit. There are a number of pending reforms that require the Center to work more closely with the states to take India’s economy forward and lift those left behind – including a slew of land and labor markets as well as the agriculture sector. Overhaul includes, but is not limited to.