Supreme Court on GST

Goods and Services Tax (GST): About

It is an indirect tax (not paid directly to the government by customers) that took effect on July 1, 2017 as a result of the 101st Amendment to the Indian Constitution.

It has effectively replaced several indirect taxes in the country, including service taxes, VAT, excise, and others.

It is imposed on both manufacturers and sellers of goods and service providers.

The tax charge is normally factored into the seller's costs, and the amount the client pays includes GST. As a result, even if one is not an income taxpayer, one must pay a tax.

For the purpose of tax collection, it is separated into five tax slabs: 0%, 5%, 12%, 18%, and 28%.

Types of GST:

State Goods and Services Tax (SGST): It is charged by the state government for intrastate services and goods transactions and this revenue is generally given to the state.

Central Goods and Services Tax (CGST): It is also charged for any kind of intrastate transaction of services and goods and it is collected by the central government.

Integrated Goods and Services Tax (IGST): It is generally charged on the inter-state transactions of services and goods and is applied on exports and imports and both the State and Centre governments share this revenue.

Some important Constitutional provisions:

Article 246A - Special Provision for GST:

This article gives the Parliament and the individual State Legislatures the authority to enact laws on the GST imposed by each of them.

The Indian Parliament, on the other hand, has exclusive legislative authority over inter-state supplies (IGST).

Furthermore, until the GST Council recommends it, some products (Petroleum Crude, High-Speed Diesel, Motor Spirit, Natural Gas, Aviation Turbine Fuel) are exempt from GST.

Article 269A - Levy and Collection of GST for Inter-State Supply:

While Article 246A gives the Parliament sole authority to adopt laws relating to inter-state supplies, Article 269A governs the allocation of money from such supplies between the Centre and the States.

It gives the GST Council the authority to make rules in this area.

Inter-state supplies refers to the import of products or services. The Central Government now has the authority to levy IGST on import transactions.

Article 279A - GST Council:

This article empowers the President of India to form the GST Council, a joint forum of the Centre and States comprised of the -

Union Finance Minister - Chairperson

The Union Minister of State, in-charge of Revenue of finance - Member

The Minister in-charge of finance or taxation or any other Minister nominated by each State Government - Members

The GST Council is an apex group tasked with modifying, reconciling, or making recommendations to the Union and States on GST issues such as products and services subject to or exempt from GST, model GST laws, and so on.

The GST Council makes decisions with a majority of not less than three-quarters of the weighted votes cast.

The Centre receives one-third of the total votes cast, while other states combined receive two-thirds of the total votes cast.

The GST Council has reached all of its decisions through consensus.

The Supreme court Judgement


The Supreme Court's decision came as a confirmation of a Gujarat High Court ruling that the Centre cannot impose IGST on ocean freight from Indian importers.

Customs duty and GST are levied on the value of imported products, which includes the cost, insurance, and freight components.

The Central Board of Indirect Taxes and Customs, on the other hand, proposed a 5% GST on the value of imported goods, with 10% of the value of imported items considered to be ocean freight.

In addition to Customs tax and GST, which is typically 28% and paid as goods, this meant a 0.5 percent GST on the value of imported products as services.

The apex court ruling:

The Union and state legislatures have equal, concurrent, and exclusive authority to enact GST legislation.

Article 246A of the Indian Constitution treats the Union and the States as equal units, giving both the Union and the States the right to implement GST legislation simultaneously.

Article 279A (which establishes the GST Council) stipulates that neither the Centre nor the states are reliant on one other.

The GST Council's suggestions are the result of a collaborative discourse between the Union and the states.

They are only persuasive in nature and are simply recommended.

To treat them as legally binding would jeopardise fiscal federalism.

The government's long-running battle with businesses to apply its IGST on ocean freight (the cost of transferring products internationally to India) on a reverse charge basis came to an end with the decision.

The importers had claimed that the IGST was being levied twice on the same transaction because components of it were being segregated.

The court found that a separate duty on Indian importers for the sale of services by the shipping line would be in violation of the Central GST Act because the Indian importer is required to pay IGST on composite supplies.

Possible impact of the apex court ruling:

Because the court has indicated unequivocally that the GST Council recommendations have merely persuasive value, this decision could alter the landscape of GST rules that are amenable to judicial review.

This is because, based on GST Council recommendations, the constitutionality of such measures can be contested.

The decision will strengthen the spirit of cooperative federalism by emphasising the importance of cooperative federalism as a necessary component of democracy's well-being.

Posted by on 24th May 2022