*Resolve GST disputes quickly and smartly – The Economic Times

Clipped from: https://economictimes.indiatimes.com/opinion/et-editorial/resolve-gst-disputes-quickly-and-smartly/articleshow/92067343.cms

Synopsis

The GST Council has the power to make recommendations on tax rates and a wide range of GST-related subjects. The council’s decisions are based on a three-fourth majority of the members present and voting, where GoI’s vote counts as one-third, while the states’ votes have a weightage of two-thirds of the votes cast. Reassuringly, over the last five years, all differences have been resolved by consensus, except one that the council decided by vote. The Constitution also empowers the council to devise a system to adjudicate any dispute that ‘arises out’ of its recommendations.

The finance ministry’s reported move to work on a mechanism to resolve goods and services tax (GST) disputes raised by states, while avoiding distortions in the tax regime, is logical. The proposal must be swiftly placed before the GST Council for approval. The need to create a robust dispute resolution mechanism follows a recent Supreme Court verdict holding the GST Council’s decisions to be recommendatory, and not binding on the Centre and states. The court also made it clear that GoI and state governments have equal power to legislate on aspects of GST. Disputes are expected to mount after July 1, when the cushion of GoI’s compensation to states for deemed shortfalls in GST collections lapses. In the absence of an acceptable way to adjudicate disputes between the Centre and states, many cases could end up in overburdened courts. This is avoidable. A separate resolution mechanism that can examine disputes – even in relation to GST collections and their disbursal between GoI and states – makes sense.

The GST Council has the power to make recommendations on tax rates and a wide range of GST-related subjects. The council’s decisions are based on a three-fourth majority of the members present and voting, where GoI’s vote counts as one-third, while the states’ votes have a weightage of two-thirds of the votes cast. Reassuringly, over the last five years, all differences have been resolved by consensus, except one that the council decided by vote. The Constitution also empowers the council to devise a system to adjudicate any dispute that ‘arises out’ of its recommendations.

Ideally, the pros and cons of a dispute can be examined by the dispute resolution body that can offer a reasoned solution that should guide the council. This will prevent any arbitrariness in its final decision-making. GoI wants to have a Dispute Redressal Bench that will include representation from the states, GoI and independent fiscal and legal experts. There must be clarity on which cases can be referred, and resolution must be swift.

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