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A Fatal Blow to the Goods and Services Tax
The Supreme Court’s judgment in Union of India v Mohit Minerals (P) Ltd (2022), while interpreting the 101st Amendment, has weakened the governance framework of the goods and services tax. The Court’s approach in the matter has exposed the fatal contradictions of the GST architecture in the Constitution and should prompt a rethink on how the GST framework needs to change to promote true cooperative federalism.
A dispute between the union government and taxpayers on the payment of the integrated goods and services tax (IGST) on ocean freight has snowballed to the extent that the very governance structure of the goods and services tax (GST) may be under threat; how a legal challenge to two notifications issued by the union government on the taxation of ocean freight led to this situation is a complicated situation that requires a bit of untangling.
The Supreme Court in Union of India v Mohit Minerals (P) Ltd1 was hearing an appeal filed by the union government against a Gujarat High Court judgment,2 which had struck down the two notifications3 on the ground that they were contrary to the IGST Act, 2017. The judgment authored by Justice D Y Chandrachud on behalf of the bench, which included Justices Surya Kant and Vikram Nath, also examines the meaning of the word “recommendation” as inserted into the Constitution by the Constitution (101st Amendment) Act, 2016 (henceforth the 101st Amendment Act, 2016) and reaches the conclusion that the “recommendations” of the GST Council are not binding on the union and state legislatures.
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