The Supreme Court on Thursday said the recommendations of the GST Council are not binding on the Central and state governments.

The apex court added that the Parliament and state legislatures possess equal powers to legislate on Goods and Services Tax (GST) and it is for the GST Council to advise suitably.

The Centre along with several importers had been fighting a battle in the apex court over applicability of GST on transportation of imported goods through sea route. The SC dismissed an appeal by the Central government against an earlier Gujarat High Court judgement that said that Integrated GST (IGST) on ocean freight is unconstitutional.

The bench led by Justice DY Chandrachud said that Parliament intended that the recommendations of the GST Council will have persuasive value.

Reading the operative portion of the ruling in the Government vs Mohit Minerals case, Justice DY Chandrachud said that recommendations of the GST council are a product of collaborative discussion. It is not imperative that federal units must always possess a higher share.

Justice Chandrachud observed that GST council is an area of political contestations as well and it impacts federalism. “The Union and states have simultaneous powers to legislate on GST and the constitution does not envisage a repugnancy provision and GST council must work in harmonious manner to achieve workable solution," he noted.

Citing 246A and 279A of the Constitution, Justice Chandrachud said that 246A treats state and Centre as equal while 279A says that state and Centre cannot act independent of each other. This also points towards competitive federalism.

“This judgement may change the landscape of those provisions under GST which are subject to judicial review. As the court has gone ahead to categorically hold that the GST Council recommendations have only persuasive value, there will be pragmatic approach to the provisions which are subject to judicial review by way of challenge to the constitutionality of such provisions based on GST Council recommendations,” said Abhishek A Rastogi, Partner at Khaitan & Co, who argued on behalf of importers.

GST Council is an apex member committee to modify, reconcile or to procure any law or regulation based on the context of GST in India. The council is headed by the Union Finance Minister Nirmala Sitharaman, who is assisted by all state finance ministers.