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Supreme Court today held that the recommendations of the GST Council are not binding on the Union and States as the ‘recommendations’ of the GST Council are the product of a "collaborative dialogue" involving the Union and States and which are, in effect, recommendatory in nature.

"To regard them as binding edicts would disrupt fiscal federalism, where both the Union and the States are conferred equal power to legislate on GST", remarked a bench comprising Justices DY Chandrachud, Surya Kant & Vikram Nath.

Court noted that recommendations of the GST Council are not based on a unanimous decision but on a three-fourth majority of the members present and voting, where the Union’s vote counts as one-third, while the States’ votes have a weightage of two-thirds of the total votes cast.

In lieu of this, the Court further said that there are two significant attributions of the voting system in the GST Council.

First, the GST Council has an unequal voting structure, where the States collectively have a two-third voting share and the Union has a one-third voting share; and second, since India has a multi-party system, it is possible that the party in power at the Centre may or may not be in power in various States.

"Therefore, the GST Council is not only an avenue for the exercise of cooperative federalism but also for political contestation across party lines. Thus, the discussions in the GST Council impact both federalism and democracy...", said the top court.

Referring to the inclusion of Article 279(1), which brought the GST council into force, by the Constitution Amendment Act, 2016, Court said that it indicates that the Parliament intended for the recommendations of the GST Council to only have a persuasive value, particularly when interpreted along with the objective of the GST regime to foster cooperative federalism and harmony between the constituent units.

The court further held that neither Article 279A begin with a non-obstante clause nor does Article 246A state that it is subject to the provisions of Article 279A.

"If the GST Council were intended to be a constitutional body whose recommendations transform into legislation without any intervening act, there would have been an express provision in Article 246A", said the Court.

It was further noted that Parliament and the State legislatures possess simultaneous power to legislate on GST and Article 246A does not envisage a repugnancy provision to resolve the inconsistencies between the Central and the State laws on GST.

Unlike the other provisions of the Constitution which provide that recommendations shall be made to the President or the Governor, Court noted that Article 279A states that the recommendations by the GST Council shall be made to the ‘Union and the States’.

In this regard, the three-judge bench has observed that recommendation of the GST Council made under Article 279A is non-qualified.

"...there is no explanation on the value of such a recommendation. Yet the notion that the recommendations of the GST Council transform into legislation in and of themselves under Article 246A would be farfetched," the court has found

The court has held that the Government while exercising its rule-making power under the provisions of the Central GST Act and Integrated GST Act is bound by the recommendations of the GST Council. However, this does not mean that all the recommendations of the GST Council made by virtue of the power Article 279A (4) are binding on the legislature’s power to enact primary legislations.

"Even if it is Parliament that has enacted laws making the recommendations of the GST Council binding on the Central Government for the purpose of notifying secondary legislations, it would not mean that all the recommendations of the Council made by virtue of its power under Article 279A have a binding force on the legislature....", said the bench.

Court further said that merely because a few of the recommendations of the GST Council were binding on the Government under the provisions of the CGST Act and IGST Act, it cannot be argued that all of the GST Council’s recommendations are binding.

Case title: Union of India & Anr. vs. Ms Mohit Minerals Pvt. Ltd. Through Director