The Constitutional Basis of GST and Whether GST Council Recommendations Bind
This article sets out what the Constitution (One Hundred and First Amendment) Act, 2016 changed, what Articles 246A, 269A, 279A and 366(12A) provide, and how the Supreme Court dealt with the legal effect of GST Council recommendations in Union of India v. Mohit Minerals Pvt. Ltd., decided on 19 May 2022.
The decision is binding and it affects how notices, notifications and challenges to GST measures are analysed. It decides whether a recommendation of the Council is law in itself, which is a question that arises whenever a levy or exemption is contested.
Background
The Amendment received Presidential assent on 8 September 2016. Before GST the Union levied central excise and service tax, while States levied VAT or sales tax and other taxes. The taxable events were separate, and credit did not flow across the taxes, which produced cascading.
What the Amendment changed
The Amendment amended Articles 246, 248, 249, 250, 268, 269, 270, 271, 286 and 366, inserted Articles 246A, 269A and 279A, and made corresponding changes to the Seventh Schedule.
Article 246A: concurrent power
Notwithstanding Articles 246 and 254, Parliament and, subject to clause (2), the Legislature of every State may make laws on goods and services tax imposed by the Union or by the State. Under clause (2), Parliament has exclusive power where the supply is in the course of inter-State trade or commerce.
A tax on "supply" cuts across goods and services, so the earlier division of taxing entries could not be retained. A special simultaneous competence was created, with State legislative authority preserved.