With its GST ruling, the Supreme Court has suggested an alternative to the BJP’s ‘one nation’ rhetoric

On May 19, the Supreme Court ruled in Union of India v Mohit Minerals that the recommendations of the Goods and Services Tax, or GST, Council are not binding on the Center or the states.

The landmark judgment, written by Justice DY Chandrachud, characterizes the Council’s recommendations as having “persuasive value” and not binding.

The decision was based on the Supreme Court’s interpretation of the articles relating to the Goods and Services Tax Act introduced into the Constitution in 2016, as well as the balance of power in favor of the Center within the Council of the GST.

The Supreme Court rejected the argument that the recommendations of the GST Council are binding on the grounds that it would “displace the delicate balance on which Indian federalism rests”.

The decision follows a long and varied Supreme Court case law on federalism. The court’s vision of federalism also articulates a constitutionally based alternative to the “one nation” rhetoric of the ruling Bharatiya Janata Party.

What drove this interpretation was that the Court relied on the federal features of the Constitution, and in particular the “unique features of federalism” introduced by the 101st Amendment which introduced the Income Tax Act. products and services.

Expanded case law on federalism

The Supreme Court has used federalism in constitutional interpretation for more than six decades. This interpretive practice received a major boost when federalism was included in the basic structure of the Constitution in Kesavananda Bharati against the State of Kerala in 1973. The case concerned whether Parliament could amend the Constitution.

It was famously used in SR Bommai vs Union of India in 1994, which relied on federalism to interpret Section 356 in a way that prevented the Center from abusing its power to impose the rule of President in the States.

While the use of federalism in interpretation has increased over time, there has been significant judicial confusion about the nature and extent of this federalism. The Indian Constitution has generally been described as “quasi-federal”, which has had an outsized influence on judicial opinions on Indian federalism.

More importantly, it directly and indirectly affected how federal cases were decided. In several of these cases, the Supreme Court relied on the alleged quasi-federal nature of the Constitution to rule in favor of the Center, limiting the powers of the state.

This is unfortunate given the context in which the label emerged and the many ways in which it is dated today. In the formal legal tradition of federal analysis that dominated in the mid-twentieth century, constitutions were compared to the American Constitution—considered the ideal federal model—and their federal characteristics were labeled accordingly.

But research has long since evolved to recognize that there is no such ideal federal model. On the contrary, each state adopts and adapts the essential federal principle of autonomy plus shared rule according to its needs. Apart from being conceptually dated, the quasi-federal label also disregards the decades of Indian federal experience that have emerged since the enactment of the Constitution.

Despite this, quasi-federalism is alive and well in Supreme Court jurisprudence. In a forthcoming book chapter co-authored with Balveer Arora of the Center for Multilevel Federalism, we found that “quasi-federal” was used in nearly 40% of Supreme Court cases between 1994 and 2020 that referred to federalism:

Source: The legal course of Indian federalism, in M ​​Madhava (Ed) Continuities and discontinuities: Politics and society in contemporary India.

In this context, the reasoning of the Supreme Court in the recent judgment is particularly remarkable: “The Indian Constitution has sometimes been characterized as a quasi-federal or a ‘centralizing drift’ Constitution… Simply because a few provisions of the Constitution confer on the Union a greater share of power, the provisions in which the federal units are supposed to have equal power cannot be interpreted in favor of the Union.

It will be interesting to see if this has an impact on Supreme Court jurisprudence in the future.

How the court ruled

In the GST Council decision, the Supreme Court attempted a harmonious interpretation of Sections 246A and 279A based on its observations regarding the federal features of the Indian Constitution.

The Goods and Services Tax Act was introduced in 2016 by the 101st Amendment to the Constitution. The amendment included sections 246A and 279A. Section 246A states that “Parliament and, subject to subsection (2), the Legislature of each State, have power to make laws in respect of the tax on goods and services”, while Section 279A provides the creation of the GST Council.

Under Section 246A, the Center and the states have the power to legislate on goods and services tax. In its ruling, the Supreme Court observed that Section 246A grants “concurrent” and “equal” law-making powers to the Center and the states over goods and services tax.

This contrasted with the division of legislative powers over matters falling under the concurrent list, such as education. If a state law on a subject on the concurrent list is inconsistent with a central law on the same subject, then the central law shall prevail.

This is due to the repugnance clause, relating to legal incompatibility, under section 254, which the court said is conspicuously absent from section 246A, which covers the Commodity Tax Act and services.

Section 279A provides for the Goods and Services Tax Council, which is chaired by the Union Minister of Finance and includes a Union Minister of State for Finance or Revenue, and Ministers of state in charge of finance, revenue or taxation.

Under this provision, the vote of the Center holds a weight of one-third, while the weight of the vote of all the states combined is two-thirds.

However, for a recommendation to be adopted by the council, a three-quarters majority is required. This means that no recommendation can be adopted without the Centre’s vote, giving it effective veto power, which means that the balance of power in the TSG Council is tilted heavily in favor of the government of the Union.

However, if the Council’s recommendations were to be binding on the states, it would reverse the concurrent and equal power of the states to legislate the Goods and Services Tax under Section 246A. To avoid this outcome, the Supreme Court held that the council’s recommendations were persuasive rather than binding.

Alternative to “a nation”

The Supreme Court judgment also underscores that states can politically challenge Union mandates within the constitutional design. He goes on to observe that “such a challenge promotes both the principle of federalism and democracy”, and that “the harmonized decision is nourished not only by cooperation but also by protest”.

He places this “contestation” of states and even “uncooperative federalism” within the framework of Indian federalism. With this in mind, he sees the TPS Council as “an important focal point for fostering federalism and democracy.”

These observations assume significance in the context of the centralizing “one nation project” of the BJP-led government. From “one nation, one tax” to “one nation, one election,” the BJP has consistently used this rhetoric to frame its centralist policies. It pushes the narrative that only uniformity can achieve harmony and development.

On the contrary, this judgment recognizes that disagreement and contestation promote harmony, integration and democracy and fall within the federal framework of the Indian Constitution.

In a sense, the Supreme Court has granted constitutional legitimacy to the many federal challenges that have emerged in recent years. However, given the number of cases pending before the court on crucial federal issues, he needs to do much more to safeguard Indian federalism.

Kevin James is a research associate at the Center for Social and Economic Progress.

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