In Parle Agro’s case, the court determined ‘flavored milk’ to be under a lower GSTtariff of 5% despite the council recommending a higher rate of 12% in its meeting of December 22, 2018. This decision would support taxpayers against GST demands based solely on council discussions or even mere clarificatory circulars.However, the government can introduce changes, including in GST rates, through legal amendments or notifications.
“The GST council in its meeting had stated that flavoured milk will be liable for a higher rate of GST. However, no amendment was carried out by way of a notification leading the HC to hold that the ‘minutes of the meeting’ do not represent the law. A similar situation could also arise where a clarification is issued by the GST council through a circular rather than through appropriate amendment in law or a notification,” said Sunil Gabhawalla, founder of a CA firm specialising in indirect taxation.
The HC relied on a Supreme Court ruling in Mohit Mineral, which had emphasised that GST council recommendations aren’t binding on the Union and states. It said that treating council’s recommendations as binding would disrupt fiscal federalism.
“The GST council is not a law-making body but is meant to provide recommendations to the legislature for making changes in law (either by way of amendment or issuance of a notification). The HC decision only re-emphasises this principle,” said Pratik Jain, partner at Price Waterhouse & Co.