‘DISPUTE RESOLUTION COUNCIL’ UNDER GST
With the growth of digital economy a person concentrates his business activities not only in a particular State but spreads it throughout the country and even beyond that. Simultaneously, rapid improvements in technology have led to drastic increase in cross-border activities. As a result of the same, disputes would arise between the parties regarding jurisdiction, tax rate, tax base and various other reasons. In GST regime, there could be various differences between the Centre and the States on account of various issues with reference to cross border transactions, issues arise in respect of levy and administering of destination State’s share of revenue, treatment of inter-state movement of goods and services. Hence, for the resolution of the various issues in GST regime, there is a need to have dispute settlement mechanism in order to have smooth flow of tax structure like the Court of Justice of The European Union (CJEU). The CJEU is responsible for the interpretation of European primary and secondary law including the EU VAT Directive and the other EU Directives and Regulations in the area of VAT. Like, European Union almost all the countries have courts as binding dispute resolution mechanisms in place to resolve disputes between taxpayer and a tax administration.
In the present Indirect tax regime, CBEC plays the role of such an advisory committee to clarify any doubt regarding scope of law and to issue clarification whenever a representation is made to it by industry or trade association. The clarification issued by CBEC are mandatory for the department whereas assesses and appellate authorities are not legally bound to follow it. However, clarification issued by CBEC finds consideration in the decision of courts. As, the countries which have adopted Value Added tax structure (GST in India) have a dispute prevention mechanism in order to promote uniform application of provisions.
Accordingly, on 19th December, 2014 the Finance Minister, Shri Arun Jaitley tabled the 122nd Constitutional Amendment Bill, 2014 in the Lok Sabha. By the said Amendment Bill, after article 279 of the Constitution, the article 279A for the introduction of GST Council has also been inserted. ‘The GST Council of India’ be created within the Constitution with power to change the tax base, tax rate etc. in GST regime and with the mandate that such decision of this Council would be binding on Central Government and the State Governments. The GST Council is required to check deviations in the GST regime, so that Centre as well as the States may not change tax rate on various goods and services on its own. Such as arrangement was also required to ensure that the objective of having a common national market was achieved and transfer of input tax credit from one State to another happened smoothly. Further, it would also help in promotion of the uniform application of provisions of the GST Act, Rules and Regulations. The main features of the GST council as mentioned in the said amendment bill can be discussed as below:
a. The GST Council is envisaged as a recommendatory body with the Union Finance Minister as Chairperson, Minister in charge of Finance or Taxation or any other Minster nominated by each State Government as members and Union Minister of State in charge of Revenue as Member of the GST Council.
b. The members of the GST Council will choose a Vice Chairman from amongst themselves.
c. The GST Council is empowered to make recommendations on issues of significance such as taxes to be subsumed under GST, rate structure, exemption list of goods/services, threshold limits.
d. Vide the present Amendment Bill, the recommendatory role of the GST Council has extended in order to include subjects such as model GST Laws, principles of levy, apportionment of Integrated Goods and Services Tax and the principles that govern place of supply.
e. The GST Council has also been vested with the power to recommend special schemes with respect to States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand.
f. The GST Council has also been empowered to recommend the date on which the GST can be levied on petroleum crude, high speed diesel, petrol, natural gas and aviation turbine fuel-which- as stated above shall continue to be taxed temporarily by the States.
g. It has been specifically provided in the amendment bill that the GST Council shall be guided with the objective to create a "harmonized structure" and a "harmonized national market" for GST.
h. Earlier, one third of the total number of members of the Goods and Service Tax Council were required to constitute the quorum of its meeting. But now, the present Amendment Bill seeks to increase the quorum for meetings of the GST Council from one-third (in the earlier Bill) to one half of the total number of members of the GST Council. Thus, instead of the 'consensus' based decision making process at the meeting of the GST Council, the Amendment Bill introduces a 'weighted voting system'. As per this voting system, every decision of the GST Council would be taken at a meeting, by a majority of not less than three-fourth of the 'weighted votes of the members present and voting', wherein the Central Government would have the weightage of one third of the total vote cast and the State Governments would have a weightage of two-third of the total votes cast.
On the reading of the same, it is clear that GST Council will help in achieving the objective to create a "harmonized structure" and a "harmonized national market" for GST as well as in promotion of the uniform application of provisions of the GST Act, Rules and Regulations. For the readers, it is hereby pertinent to mention that before the introduction of article 279A for GST Council in the amendment bill; most of the States were agreed for the setting up of GST Council before introduction of GST in India except Gujarat and Nagaland State. Gujarat and Nagaland State recommended that there is no need of creation of Goods and Service Tax Council as the Empowered Committee of State Finance Ministers is working for last several years on consensus basis. And now, before introduction of GST in India, this Empowered Committee of State Finance Ministers can be converted into GST Council. However, for the proposed Article 279A, the responses of the States were considered by the Empowered Committee and accordingly, the Empowered Committee has made suggested changes in the proposed GST Council in the amended 122nd Constitution Bill. Now, we all are hoping that GST Council will work in that manner which would help in smooth implementation GST regime in India.
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