SC: Suggestion of GST Council not binding

NEW DELHI: The recommendations of the Goods and Services Tax Council are not binding on the Centre and states, and that such recommendations only have a persuasive value, the Supreme Court observed on Thursday.

It further ruled that the Union government and states have equal and co-ordinate power to legislate on matters of Goods and Services Tax (GST), delivering a significant verdict outlining the powers of federal units in a democratic set up.

The court pointed out that there are no provisions in the Goods and Service Tax Act, 2017 (GST Act) that deal with situations where there is repugnancy between the laws drawn up by the central government and states, and it is for the GST Council to advise them suitably whenever such occasions arise.

“The Union and state legislatures have simultaneous powers to legislate on GST and constitution does not envisage a repugnancy provision and GST council must work in harmonious manner to achieve workable solution,” held the court. The court ruling came while upholding a 2020 decision of the Gujarat high court to quash the levy of Integrated Goods and Services Tax on the importers on ocean freight under reverse charge.

In Mohit Minerals Pvt Ltd Vs Union of India, the Gujarat high court held that no tax is leviable under the Integrated Goods and Services Tax Act, 2007, on the ocean freight for the services provided by a person located in a non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India.

The levy and collection of tax of such ocean freight under the impugned Notifications is not permissible in law, said the high court.

The central government introduced the Notification No.8 of 2017 – ITax (Rate) in June 2017 notifying that the IGST at the rate of 5% will be leviable on the service of transport of goods in a vessel. This notification was quashed by the high court.