The Delhi High Court rejected the plea challenging 5% GST on all varieties of fabrics falling under Chapters 50 to 63 of the Customs Tariff in furtherance of the recommendations made by the Goods and Service Tax Council.
The Petitioner, Manufacturers Traders Association, a society comprising of members engaged in the manufacture of fabrics, has invoked the extraordinary writ jurisdiction of this Court under Article 226 of the Constitution of India, 1950 seekinga writ in the nature of mandamus directing the Central Government as well as the Government of NCT of Delhi to notify the GST rate of 5% for all varieties of fabrics falling under Chapters 50 to 63 of the Customs Tariff in furtherance of the recommendations made by the Goods and Service Tax Council.
The subject matter of the petition revolves around three GST Notifications.
Firstly, Notification No. 1/2017-Central Tax (Rate) dated June 28, 2017 issued by Central Government under Section 9(1) of the CGST Act, 2017, notifying the rate of central tax at 6% on Intra-State supply of fabrics.
Secondly, Notification No. 1/2017- Integrated Tax (Rate) dated June 28, 2017 also issued by Central Government under Section 5(1) of the IGST Act, 2017, notifying the rate of integrated tax at 12% on Inter-State supply of the fabrics.
Thirdly, Notification No. 1/2017-State Tax (Rate) dated June 30, 2017 issued by Government of NCT of Delhi under Section 9(1) of the DGST Act, 2017, notifying the rate of state tax at 6% on Intra-State supply of fabrics made within the NCT of Delhi.
In terms of the afore-noted notifications, for fabrics falling under Chapter 50 to 63 GST at the rate of 5% has been notified, except for the varieties of fabrics falling under Chapter 58 and 59 for which GST is notified at the rate of 12%.
The Petitioners is not satisfied and persists that the Goods and Service Tax Council has recommended tax at the rate of 5% for all fabrics. To buttress his contention, he relies upon the reply given by the Union Minister for Finance in response to a starred question raised in the Rajya Sabha.
The single judge bench of Justice Sanjeev Narula rejected the contention of the petitioner and held that the 101st Amendment to the Constitution had brought into existence the GST framework and created Goods and Service Tax Council as the highest deliberative forum to resolve the issues arising out of the implementation of the GST. The rate of taxes is jointly decided by the centre and states on the recommendations of the Council.
The composition of Goods and Service Tax Council and the constitutional scheme of taxation is a clear indication that the functioning of the GST Council is based on collaborative efforts that embody the spirit of cooperative federalism. The coming together of the stakeholders has given rise to a unified system of taxation for the entire country. The GST tax rates must be notified in consonance with the recommendations of the Goods and Service Tax Council, the court said.
“The only aspect that required introspection now stands concluded in view of the emphatic response of the GST Council in its 38th Meeting, wherein they have reiterated that the recommendation for the rate of tax was indeed 12%. The impression of contradiction that appeared in the comparison between the counter affidavit of GST Council and the minutes of the meeting has been resolved and conclusively settled,” the court said.
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