GIC is not GST Council: Manpreet Badal to Nirmala Sitharaman

He further added - GST Council cannot be bypassed while framing GST Rules.

Subordinate law (i.e. rules) cannot be used for restraining the rights of taxpayers and imposing additional fetters of a substantial nature.  

Mr. Singh has again wrote a letter to FM, Nirmala Sitharaman for bypassing the GST Council while framing GST Rules and raised some important points.

Subject: Regarding Powers of GIC.

I am writing this letter with regard to an issue I had raised during the last council meeting, namely the need to obtain the council’s approval for decisions taken by the GIC. At the very outset, I would like to unequivocally state that Punjab’s decision to proffer this concern emanates not from any desire to deliberately fault finding, but to enhance the council’s ability to collectively make decisions that are backed by consensus and unsusceptible to potential future legal challenges. I deem it necessary to clarify our intent because despite some support from other states, Punjab’s observations were not well received and the discussions that followed were tangential and inconclusive.

It is my firm conviction that this issue is of the utmost importance and must be examined with all seriousness by the Finance Ministry, and perhaps even considered in consultation with the Law Ministry and the Hon’ble Advocate General.

Allow me to reiterate my observation and encapsulate the crux of my argument. The power of the Central and State Governments to make rules in respect of GST is contained in section 164 of the respective GST Laws and Section 22 of the IGST Law.

The relevant sections commences with the following statute.

There is no other clause anywhere in the GST laws that provides the power to make rules.

It is imperative to understand that recommendations of the GIC (GST Implementation Committee), even those that are endorsed by the Law Committee – which is comprised merely of officers and not elected representatives – do not amount to recommendations of the GST Council. This crucial distinction must be acknowledged with a supplementary acceptance of the fact that there is a prescribed procedure for decision making by the council which cannot be circumvented in any manner without creating conflict with the law on the subject.

Moreover, details of how many officers are represented on the respective committees and which states they hail from are entirely immaterial. Even if every state were represented on an officers’ committee, the body in question could by no means act as equivalent or substitute of the GSTC. Attempting to do so would inherently involve ignoring fundamentals legal requirements. The opinions of these committees are hence only advisory, and legally binding. By failing to obtain the approval of the Council, we have subjected all the rules made on the basis of recommendations of the GIC to judicial review with the risk of being declared ultra vires.

India’s jurisprudential tradition ensures that subordinate law (i.e. rules) cannot be used for restraining the rights of taxpayers and imposing additional fetters of a substantial nature. There is significant precedence of courts striking down such provisions on grounds of “excessive delegation”. If it is resolved that such provisions are required, they must be implemented through the process of legislation.

Thus, on the one hand, we are taking decisions of overarching significance that impact tax payers by means of subordinate law, and on the other, refraining from seeking even the approval of the council, as mandated by the charter of the GST laws.

In the spirit of cooperation and collective responsibility, I had therefore suggested that instead of putting up these decisions for further advice, we should have them retrospectively approved by the Council in order to ensure that they are absolved of any legal liability and able to withstand possible judicial challenges.

However, I regret that my bonafide recommendation was not received in the same spirit of faith and friendship in which it was submitted, and rather than pay heed to the principle behind our proposal, the ensuing deliberations turned political.

We shall be setting an unworthy and inappropriate precedent if actions of the GIC and Law Committee are referred back to the law Committee for interpretation and decision.

I would not be remiss in declaring the practice of bureaucrats judging – with final authority – the observations of corrected if an opinion of the Law ministry or the Hon’ble AG is taken and proves contrary to my line of logic.

I have laid before you my opinions with confidence and candor, and now leave this subject to your judgment, in the hope that you will imminently take a decision that is both judicious and objective. Punjab’s sole motivation in this matter is the highest interests of the Council and our nation.

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