GST dispute: Center working on GST dispute resolution system

The Finance Ministry is working on a comprehensive mechanism that can resolve Goods and Services Tax (GST) disputes raised by states while avoiding distortions in the tax regime. The mechanism can be further discussed with the states GST The council meeting is expected sometime in June.

The scheme includes a Disputes Redressal Bench which will be represented by states, the Center and independent law and tax experts who are well-versed in the legal and economic implications. There will be detailed guidelines on what matters can be referred for such process. The need for such a mechanism comes even after a recent Supreme Court ruling that the recommendations of the GST Council are not binding on the states or the Centre.

A senior official told ET, “We are working on the procedures for the dispute resolution mechanism, which some states are demanding. “It is being discussed. Once the draft is ready, we will take it up to the council, which will take the final call.”

There is a provision for voting in the GST law to resolve disputes. The Center has one-third of the votes while the remaining two-thirds are held by the states. In the case of a vote, the decision must be passed or rejected by a majority of not less than three-fourths of the votes of the members present.

GOM model of resolution

The Council usually constitutes Groups of Ministers (GoMs) to resolve differences between states, be it flood cess or rate rationalisation. Through this route, over the past five years, all differences have been resolved by consensus except one, which was decided by the Council by vote.

Opposition-led states say they have little chance of getting results as most of the states are governed by the Bharatiya Janata Party (BJP), which is also in power at the Centre. He has demanded a mechanism that gives every state a legitimate hearing. A dispute resolution bench could potentially take independent decisions beyond the influence of the Centre.

Supreme Court’s decision

The Center is anticipating more controversies from July 1, when the GST compensation cushion comes to an end and states start looking for ways to compensate for the revenue loss.

Without an acceptable mechanism, most cases could end up with an already overburdened judiciary.

The Supreme Court’s decision last month in a case related to the imposition of a unified GST on import of marine goods has expedited the search for a dispute settlement mechanism.

The top court had said, “The GST Council is a product of collaborative discussion. It is not necessary that the federal entities should always have a high stake.” He said that the recommendations of the GST Council are not binding on the states or the Centre.

The council is also expected to consider the report of a GoM, chaired by Meghalaya Chief Minister Conrad Sangma, which favored the highest rate of 28% on online gaming, racing and casinos. It may also consider the issue of Integrated Goods and Services Tax on maritime goods, which was struck down by the Supreme Court.

Another official told ET, “The Center has not taken any decision yet and is only studying the matter. She will take a decision only after discussing with the council.