The Supreme Court on Thursday held that both the Union government and states have equal powers in making laws related to the Goods and Services Tax, or GST, Live Law reported.

Notably, a bench of Justices DY Chandrachud, Surya Kant and Vikram Nath also held that the Centre and state governments are not bound to follow the recommendations made by the GST Council, according to PTI.

“The recommendations of the GST Council are the product of a collaborative dialogue involving the Union [government] and the states,” the bench said, according to The Hindu. “They are recommendatory in nature…The recommendations only have a persuasive value.”

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Referring to the Goods and Service Tax Act, 2017, the court said there are no provisions to deal with repugnancy between the laws made by the Centre and states.

“[The] constitution does not envisage a repugnancy provision and GST council must work in harmonious manner to achieve workable solution,” the bench said, according to the Hindustan Times.

The court also said that Indian federalism is a dialogue between cooperative and non-cooperative federalism. The Centre and states, it added, should always engage in dialogue.

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The bench passed the verdict while upholding a 2020 judgement of the Gujarat High Court that had quashed a central government notification that had levied a 5% Integrated Goods and Services Tax, or IGST, on transportation of imported goods through sea route.

Reactions to the verdict

Kerala Finance Minister KN Balagopal praised the Supreme Court’s verdict, saying the judgement upholds the federal rights of the states and the citizens, according to PTI.

“We always maintained that there should be no taxation without representation…,” the minister said. “Article 246A treats Centre and State as equal and Article 279 of the Constitution says that Centre and State cannot act independent of each other.”

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However, Revenue Secretary Tarun Bajaj said that the ruling is unlikely to materially impact the one-nation-one-tax regime as it is only a reiteration of the existing law.

“The Constitutional amendment that brought the Goods and Services Tax regime from July 2017 by subsuming nearly one-and-a-half-dozen central and state levies, provided for a Council of Centre and states for decision making,” Bajaj said, according to PTI. “The recommendations of the GST Council, as per the Constitutional amendment, were always a guidance and never a mandatory compliance.”