 "SUPREME COURT")
The Supreme Court ruling that recommendations of the GST Council are not binding on the Centre and state governments may make the voices of dissenting states louder, putting greater emphasis on building consensus within the Council.
The apex court verdict has struck a chord with non-BJP states such as Tamil Nadu and West Bengal who had been critical of the way affairs were being managed in the Council in the recent past.
Tamil Nadu Finance Minister PTR Palanivel Thiaga Rajan had told Business Standard that he had made similar remarks when he joined the council a year ago. At that time, he had called it a rubber-stamp authority. “We have arrived at a constitutional and historical oddity — a GST system and Council that function with an omnipotent and all-encompassing mandate not envisioned in the Constitution, yet deeply limited by a structural design and technology platform that are far from adequate to the important task,” the Tamil Nadu finance minister had said.
“What makes this oddity truly alarming is that the actual council is becoming in some ways a mere ceremonial seal, a rubber-stamp authority, with the real power to create policy abrogated to (constitutionally) ad hoc agencies such as the TRU (tax research unit) of the CBIC, a feeble GST Secretariat, and the quasi-governmental GST Network,” he had added.
In the past, the lack of a consensus approach in the GST Council has been flagged by West Bengal repeatedly within and outside the Council.
Amit Mitra, principal chief advisor to Chief Minister West Bengal and former finance minister of the state, said, “The spirit of the judgment is collaborative and federalist though I am yet to read the fine print.” “Over the last few years, the spirit of collaboration leading to a genuine consensus has weakened in the GST Council and a majoritarian approach has been taken by the Centre,” he said.
Mitra, who had been a chairman of the empowered committee of state finance ministers on GST, pointed out that there were several occasions in the first few years when acute differences appeared in the Council between states and the Centre or between states.
A case in point, he said, was where the central government was pushing states to accept that any taxes collected within 12 nautical miles on the sea will accrue to the Centre.
“Across political parties, states came together and they argued for hours and over days, and finally the central government yielded to a consensus,” he said.
But the exact opposite, he said, was the debt case.
“The empowered committee of finance ministers of all states agreed to GST only on the specific condition of five years of full compensation by the Centre on an agreed formula. Instead of following that, in the last few years, full compensation has been done away with and debt is being pushed on to the states,” Mitra said.
“This is in contradiction to the agreement between states and the Centre violating the spirit of consensus and federalism which seems to have been alluded to in the judgment,” Mitra pointed out.
Hailing the verdict, Kerala Finance Minister K N Balagopal said, “I am yet to see the full verdict. But it is clear from the reports that it is a verdict that upholds the federal rights of states and the people.” He added that his party CPM had always been sceptical about the role of the GST Council.
Gujarat principal secretary for finance pointed out that the GST law has not been made so far without the Council’s recommendations. “The judgment will have to be read and understood in its entire context,” Principal Secretary for Finance J P Gupta said.
However, he added, as such, the GST Council is a constitutionally mandated body and any change in GST law has not been made so far without its recommendations. “GST was conceptualised in a manner that no state can take independent decisions, and both states and the Centre need to have a uniform law,” said Gupta. The Gujarat CMO declined to comment.
Bipin Sapra, partner, EY, however, pointed out that this was something that everybody was aware of, when the GST Council was created. “There is Article 246A, which gives the power to the states and the Centre to levy GST. Then there is Article 279A, which gives the powers for the GST Council. Power of the state is not subordinate to the GST Council. What is happening is that the state with all their powers is coming to the council and they agree in the spirit of cooperative federalism to have a unified GST,” Sapra said.
(With inputs from PTI)
