GST COUNCIL (Syllabus: GS Paper 2 – Polity)

Context: In a recent verdict, the Madras High Court clarified that the GST Council's involvement, especially concerning the classification of a product, is recommendatory and non-binding.

GST Council

• Article 279-A of the Constitution: The GST Council functions as a collaborative platform involving both the Central and state governments.

oIt grants the President the power to establish the GST Council through an executive order.

• Function: To provide recommendations to both the Union and the states on crucial GST-related matters, encompassing the taxation of goods and services, exemptions, and the formulation of model GST Laws.
• Scope of Recommendations: The Council addresses issues such as goods and services subject to or exempted from GST, model GST Laws, place of supply rules, threshold limits, and GST rates (including floor rates).

HC on the powers of the GST Council

• GST Classification Authority: The Madras HC emphasized that the GST Council lacks the authority to determine the classification of goods, asserting that such a responsibility falls within the government's domain.
• Government's Responsibility: According to the Madras HC, it is the government's duty to establish an appropriate rate for goods classifiable under the Customs Tariff Act, 1975.
• Judicial Reference to Mohit Minerals Case: The Madras HC's judgment referred to the Supreme Court's ruling in the Mohit Minerals case (November 2022), highlighting the apex court's observation that the decisions of the GST Council are not binding on the Union or states.
• Council's Recommendations: The Madras HC referenced the Constitution Amendment Act 2016, emphasizing that the inclusion of Article 279(1) and the deletion of Article 279B indicate that Parliament intended for the recommendations of the GST Council to only hold "persuasive value."