GST New Mechanism to resolve Centre-State Dispute In the Works

GST New Mechanism

GST New Mechanism: According to an report, the upcoming GST Council meeting, which is expected to take place this month, will likely include a discussion on a mechanism to resolve GST disputes raised by states. The finance ministry is currently working on the mechanism, according to the report.

The plan includes a dispute resolution bench, which comes after the Supreme Court recently ruled that GST Council recommendations are not binding on the states or the central government. States, the Centre, and independent law and tax experts well-versed in legal and economic implications will all be represented on the bench. There will be specific instructions on which cases can be referred to this procedure.

“We are working on the procedures of the dispute resolution mechanism, which some of the states have been demanding… This is under discussion. Once the draft is ready, we will take it up to the council, which will take the final call,” said the report quoting an official.

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The Centre announced on May 31 that it had released the entire amount of GST compensation due to states until May 31, 2022. The finance ministry said in a statement that the government has released Rs 86,912 crore to the states as part of the GST compensation dues.

How Disputes Are Resolved Currently?

To address differences among states, the GST Council usually forms groups of ministers (GoMs). Most of the differences have been resolved through the existing system in the five years since the GST was implemented in 2017.

The Council also established a panel of state ministers, led by Karnataka Chief Minister Basavaraj Bommai, to recommend ways to increase revenue by rationalising tax rates and correcting tax anomalies.

It is expected to complete its recommendations by early next month, after which they will be presented to the Council for a final decision at its next meeting, which is expected to be in mid-June.

Supreme Court Ruling on GST Council Recommendations

Last month, the government stated that the GST Council’s recommendations will be persuasive. The Court also ruled that both the federal and state legislatures have equal authority to legislate on GST issues. The GST Council, it said, is merely a consultative body whose recommendations are not binding on the Centre or the states.

According to experts, it is likely to re-ignite the debate over state financial independence and the importance of cooperative federalism for the GST’s success.

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