Five Years of GST Law: A Review | Brief History Of GST

Brief History Of GST

On 1st of July, 2022 Goods and Services Tax Law will complete its 5 years. And the work is still in progress. However, the law has undergone major and drastic changes and amendments in these five years. As the Goods and Services Law will enter its sixth year, there is major development coming on its way. This is because of two reasons. 

Firstly because of the centre’s decision to end the GST compensation revenue funds to the states and the recent Supreme Court’s decision regarding GST council’s decisions not binding on the centre and on states. These two decisions will give more authority and power to states in the GST council.

Mohit Minerals Case

In this case, the major issue that came before the apex court was whether GST could be levied for the second time on ocean freight when IGST was levied on the total transaction value which included freight. The most interesting thing in this major decision was the observations of the Supreme Court on the GST council. 

The major part of the ruling was that the recommendations of the GST council will not be binding for both the centre and states. Parliament only wants the GST council to have a persuasive value, particularly when this will be interpreted along with the major objectives of the GST regime to foster cooperative federalism and harmony between the constituent units.

Now, Parliament and states possess simultaneous power to legislate and to adjudicate on the matters related to the GST. That’s why the GST council’s decisions are recommendatory in nature so as not to disrupt fiscal federalism where both the centre and the states possess equal power.

Provisions related to the Goods and Service Tax Law

The government is bound by the recommendations of the GST council while exercising its rule-making power under the provisions of the CGST and IGST act. However, it does not mean that all the recommendations of the GST council made under the Article 279A (4) are binding on the legislature’s power to enact primary legislation.

The provisions of CGST Act and IGST Act define reverse charge and prescribe the entity that is to be taxed for those purposes. The government by the notification did not specify the difference between the taxable person and recipient prescribed in the Section 5(3) of the IGST Act for the purposes of reverse charge. The levy imposed on the ‘service’ impact of the transaction is in the violation of ‘composite supply’. It comprises a supply of goods and supply of services of transportation, insurance etc. 

However in the CIF contract, a separate levy on the Indian importer for the ‘supply of services’ by the shipping line is in the violation of Section 8 of the CGST Act.

About GST Council Meeting

The decision regarding the compensation is yet to discuss in the upcoming GST council meeting. However, there are other aspects too that will be discussed in the meeting such as the need for fully functional GST tribunals across the country. The GST council is also proposing to establish a dispute resolution mechanism to solve the disputes. The GST council will also need to discuss and finalise the GST rates rationalisation. These provisions regarding input tax credit under GST are very different today from what they were five years ago.

The GST council should also propose a list of items on which credit cannot be availed and permit credit on the rest.

Conclusion

In a nutshell, it can be concluded that the GST council has enough data, provisions and rules to implement a plethora of ideas and proposal and also have the authority to punish those who contravene these provisions.