Courts Will Now Have To Be More Proactive In Judicial Review Of GST Legislation Say Legal Experts

The Supreme Court on Thursday held that the recommendations of the GST Council are not binding on the Union and the State Governments. 

Clarifying the scope of the functional value of GST Council, the apex court was of the view that both the Parliament and the State Legislatures can equally legislate on matters of Goods and Service Tax. 

This decision holds significance since it clarifies the relative powers and authority of the Parliament and the state legislative assemblies vis~a~vis the GST Council. Although the Supreme Court acknowledged the pursuasive value of the recommendations of the GST Council, it clarified that the Council is an informal body and its dicisions are not law.

Welcoming the dicision of the Supreme Court, Kumar Visalaksh, Partner, Economic Laws Practice,  says, "when the dream of 'One Nation, One Tax' was laid out, it was clear that the introduction and continuation of GST were dependent on the spirit of cooperative federalism between Centre and States."

The judgement recognizes the concept of 'competitive federalism' qua GST and taxing statutes in general. The Court has held in clear terms that the States are not subservient to the Centre or the GST Council, he adds.

However, the courts would now have to be more proactive in the judicial review of GST legislation as a consequence of the Judgement. The verdict may also lead to flooding of litigations challenging any discrepancy or unfavourable GST Council decisions.

"The delegated authority, i.e. GST Council, must act precisely within the confines of the authority given to it under the Act, and the notion of implied intent or the idea of incidental and ancillary power will not be appropriate in the exercise of fiscal power as it affects several taxpayers", says, S.R. Patnaik, Partner Cyril Amarchand Mangaldas.