- In Union of India and anr vs M/s Mohit Minerals through Director the Apex Court has observed that the recommendations of the GST Council are not binding on the Centre and the States, but only has a persuasive value. It was also observed that both the Union as well as the State Legislatures have the power to legislate in the matters of Goods and Services Tax.
- The Court observed that the recommendations of the GST Council are the product of a collaborative dialogue between the Centre and the States. They are recommendatory in nature. To regard them as binding would disrupt fiscal federalism.
- The Court further observed that Article 246A introduced by the amendment of 2016 vests the Parliament and the State legislature with the concurrent powers to make laws with respect to GST. If the GST Council was intended to be a decision making authority, whose recommendations transform to laws, such a qualification would have been included either in Article 246A or 279A, but this is not the case.
- It was also observed that the deletion of Article 279B and addition of Article 279(1) would indicate that the Parliament intended for the recommendations of the GST Council to have a mere persuasive value, particularly when interpreted alongwith the objective of the GST regime to foster cooperative federalism and harmony between the constituent units.
- The Court further observed that the Government, while exercising its powers under the CGST Act and the IGST Act is bound by the recommendations of the GST Council, but that does not mean that all the recommendations of the GST Council made by virtue of the powers under Article 279A(4) are binding on the legislature’s power to enact laws.
- In numerous cases like Manohar vs State of Maharashtra (2012) SCC and Naraindas Indurkhya vs State of MP (1974) SCC the Apex Court has reiterated that recommendations cannot create binding and enforceable rights, in contradiction to a direction or a mandate.
- The Court also talked about the concept of ‘Uncooperative Federalism’ whereby the States can use various forms of contestation within the Constitutional framework. It was observed that when the federal units are vested with unequal powers, the collaboration between them is not necessarily cooperative. Harmonised decision thrives not only on cooperation but also on contestation. Uncooperative Federalism is valuable since it is desirable to have some level of friction, some amount of State contestation and some deliberation-generating froth from our democratic system.
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