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313 viewsAll GS PapersGS Paper 3
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  1. Introduction on the objectives of GST.
  2. Mention about GST Council and its envisaged uniformity.
  3. Discuss SC’s recent judgement & its possible implications.
  4. Conclusion

GST was introduced as a pan-India indirect tax law, replacing multiple laws like central excise, service tax, VAT, etc. The objective was to have a common law & procedure and uniform rates that enable the ease of doing business by doing away with the complexities of multiple levies. As a departure from the erstwhile taxes that were divided amongst Centre & states, the GST was intended to be governed and legislated both by the Centre and the states in the spirit of ‘Cooperative Federalism’.

GST Council: Art 279A, providing for the formation of the GST Council with representation from both the Centre and the states was inserted into the Constitution. Every issue relating to GST implementation are deliberated as per the decision of the GST Council.

Uniformity: A fine balance was sought to be struck to ensure that there is amalgamation of purpose and intent without compromising on the autonomy to legislate. There is a provision of differential voting rights, and in case of any difference in opinion, the issue must be decided by 3/4th majority. This way of functioning ensures uniformity of GST laws across India. To iron out any differences, a dispute resolution within the framework of GST Council was conceived, consisting representatives of Centre and the states themselves. Hence, the delicate question of autonomy vs. uniformity was sought to be addressed by enabling the GST Council to take own decisions. Not only decision making, but also distribution of taxes collected is subjected to the same principles of uniformity, providing huge advantage to the tax payers.

Supreme Court’s judgement & its ramifications: However, in a recent landmark judgement on fiscal federalism, the SC observed that the decision of the GST council is not binding and carries only a persuasive value. Hence, both the Centre and the states retain their independence to legislate on GST laws. This judgement has huge ramifications as the concept of uniform laws will suffer a serious drawback if the GST Council’s decision loses its enforceability.

Thus, it has arisen many skepticism – (a) it may allow the states to have amendments to the GST law, specific to their legislation, which may wreck the very foundation of the GST regime; (b) this can lead to different rates charged by Centre and the states to augment tax collections; (c) this will, in turn, impact the IGST – sum of the Centre & state GST rates – which raises question as to how IGST distribution will happen if there are different rates ?; (d) also, will there be different IGST rates for import of goods in different states ?; (e) it can negatively impact the GSTN framework as it will be nearly impossible to operate the system in an environment of different laws & rates; and (f) voting rights will lose relevance if decisions cannot be enforced.

It is important not to lose sight of the fact that the design of GST laws is such that both the Centre and the states are conjoined twins, their fates being interwoven. For ease of business, the idea was to bring everything under a common umbrella. Therefore, any attempt to separate them can disintegrate the uniform character and unravelling of the framework which has been designed to perpetuate the uniformity.

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