New order disrupts GST Council smooth functioning

The Supreme Court judgment last Thursday terms the decisions of the Goods and Services Tax Council merely recommendatory in nature enjoining neither the states nor the Centre to implement them. This is bound to prove unhelpful in realising the worthy goal of a uniform, one-country, one-tax objective and inject chaos and anarchy into the marketplace. Hearing an appeal against the order of a division bench of the Gujarat High Court which had upheld the plea of coal importers against the levy of Integrated GST on coal used for domestic use, a three-member bench headed by Justice D. Y Chandrachud stripped the GST Council of its main role and power. Should this order remain unchallenged it would allow a few states to topple the carefullycrafted tax structure which has served its purpose well insofar as it has largely succeeded in lowering inter-state barriers, facilitating free movement of goods and services, and introducing a measure of uniformity in the nation-wide common market.

Indeed, the GST Council was a sterling example of cooperative federalism with the states and the Centre sitting together to make decisions with the widest possible consensus. The Council determined its own procedures, and its own agenda and even though meetings were chaired by the Union Finance Minister, the states enjoyed two-thirds weightage in votes against one-third for the Centre. But the most important thing is that during the last five years the Council has functioned despite differences. A clear and workable consensus was made possible for uniform implementation throughout the country. Now, the fear is that, thanks to the encouragement stemming from the apex court’s ill-conceived judgment, recalcitrant states purely for political reasons might seek to disrupt the functioning of the GST Council. Given the bitterness and confrontation in the political arena, allowing its reflection to cast a shadow over the smooth functioning of the major consensus-building body ought to have been avoided.

Clearly, there was little thought given to the constitutional stipulation that the “Council will be guided by the need for a harmonised national market for goods and services tax and for the development of a harmonised national market for goods and services.” Instead, the court seemed to have gone by the provision that says that the GST Council “shall make recommendations to the Union and the States.” Since `may’ had happily become ‘will’ in actual implementation, the apex court ought to have tip-toed carefully around the provision instead of injecting instability and uncertainty in the working of the GST Council. The sooner the above order is reviewed by a bigger bench the better. Otherwise, positive tax reform could be in jeopardy.