GST Council recommendations pertaining to rules, rates binding on states: Junior Finance Minister

The Centre expects its GST collections to rise by 12 percent in 2023-24.

The recommendations of the GST Council pertaining to rules, notifications, and rates are binding on the states and the Centre, a minister of state for finance said on July 19.

“The State and Central Acts provide that rates, exemptions, and rules, etc. would be prescribed only on the recommendations of the GST council and, therefore, the recommendations of the GST Council with respect to subordinate legislation, e.g. those pertaining to rules, notifications and rates are binding on States and Centre,” Pankaj Chaudhary said in a written response to a lawmaker’s question in the parliament’s upper house.

The minister’s comments are significant as a few states had raised questions after the Supreme Court earlier this year said that the GST Council’s recommendations are not binding. The ruling had led to concerns that some states may seek to not go with the consensus at the apex body of the indirect tax regime.

The ruling does not alter the constitutional mechanism of the GST Council, minister Chaudhary said.

Also read: Supreme Court has not altered fundamental features of GST, says finance minister

Some states, facing a fiscal crisis as GST compensation to them ended last month after five years, have demanded that the compensation should be extended going ahead and had raised questions about the indirect tax regime.

“The recommendations pertaining to GST laws are implemented through the normal legislative process and to that extent the recommendations have a persuasive value,” minister Chaudhary said in his response. “The judgment of the Apex Court only augments this process.”

Over a thousand decisions have been taken by the GST Council over the last five years and only one of them had required voting, and even the dissenting states had implemented the recommendation of the council, the minister added.

The GST Council is due to meet next month.

Meanwhile, the Kerala government on July 19 said it does not intend to tax items sold by entities like Kudumbashree, or small stores, in 1 or 2 kg packets. State Finance Minister K N Balagopal told the Kerala Assembly that the decision might lead to issues with the central government but the state was not ready to compromise.

The GST Council had at its meeting in June decided to impose a tax of 5 percent on 'pre-packaged and labelled’ pulses, cereals like rice, wheat, and flour up to 25 kg. Earlier, such items attracted GST when branded and packed in unit container.