Opposition-ruled states say the GST ruling upholds federal rights

ew Delhi: Opposition-ruled states have said that the Supreme Court judgment, which ruled that the GST Council’s recommendations are not binding on the states, upholds the federal rights of the states and the people. Experts say the ruling will not impair the body’s effectiveness.

Welcoming the order, Kerala Finance Minister KN Balagopal said in multiple tweets that “the ruling on the powers of the GST Council on taxes and the rights of the state government is a landmark”.

“It will be a great impetus for co-operative federalism. And that is what I feel from the first reading of the Supreme Court judgment today,” Balagopal said. He maintained that he had not yet seen the full verdict.

Opposition states that the ruling upheld federal rightsCompanies

Tamil Nadu Finance Minister P Thiaga Rajan said the verdict was in line with what he had flagged and the way forward would be discussed after studying the order. Speaking to media, he said the order highlighted the effectiveness of the GST Council. In light of the verdict, he tweeted that the GST system “needs a complete overhaul”.

“The Supreme Court has pointed out that the GST Council, a statutory body, has the power to make recommendations only and its decisions can only be applied after the Union and State Governments have made appropriate amendments to their respective laws,” he said.

States have said it will affect the functioning of the GST Council in the future.

Chhattisgarh Finance Minister TS Singh Deo said, “This is a welcome step. It will restructure the way the council works.”

Take the expert

Experts are divided over the verdict.

Bipin Sapra, YY India Tax Partner, said, “Most of the decisions of the GST Council have been taken by consensus and in the spirit of cooperative federalism. The absence of legal basis will not hamper the functioning of the Council.”

“This will have far-reaching implications for many other areas where states do not agree with the GST Council’s decision, especially in light of the compensation period ending in June. This area should be looked at closely,” said Mahesh Joysing, a partner at Deloitte India.

Another expert said the ruling put a question mark on various recommendations of the GST Council and would open more cases. “It makes clear that the GST Council is an informal body whose inputs should be taken into account, but it has no legislative power and laws must be enacted by bodies that have the power to do so, namely Parliament and state legislatures,” said SR Patnaik, partner and Chief – tax system, law firm Cyril Amarchand Mangaldas 6

Courts now need to be more proactive in their judicial review of the GST Act, Patnaik added.

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