The plan includes a Dispute Redressal Bench that will have representation from states, Centers, and independent law and tax experts trained in legal and economic implications. There will be detailed guidelines on which cases can be referred to such a process. The need for such a mechanism also follows a recent Supreme Court decision that the GST Council recommendations are not binding on the states or the Center.
“We are working on the procedures of the dispute resolution mechanism, which is demanded by some of the states,” a senior official at ET said. “It is being talked about. When the draft is ready, we will take it to the council, which will take the final call. “
There is a provision for voting on the GST law to resolve disputes. The Center has a one-third vote while the states make up the remaining two-thirds. In the case of a vote, a decision must be passed or rejected by a majority of at least three-quarters of the weighted votes of the members present.
GoM Resolution Model
The council typically establishes groups of ministers (GoMs) to address differences between states, whether it’s a flood of cess levy or rate rationalization. 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 changing the results because most states are governed by the Bharatiya Janata Party (BJP), which also holds power in the Center. They called for a mechanism that allows each state the opportunity of a legitimate hearing. A dispute resolution court may make independent decisions, which are beyond the influence of the Center.
Supreme Court decision
The Center expects more disputes from July 1, when the GST compensation cushion is gone and states are starting to look for ways to compensate for the loss of revenue.
If there is no acceptable mechanism in place, most cases can end up in a very heavy judiciary.
The decision of the Supreme Court in a case related to the imposition of combined GST on ocean freight imports last month sparked more need for finding a dispute settlement mechanism.
“The GST Council is a product of collaborative discussion. It is not necessary that federal units should always have a higher share, ”the supreme court said, adding that the GST Council recommendations are not binding on the states or the Center.
The council is also expected to consider the report of a GoM led by Meghalaya prime minister Conrad Sangma that favored the highest 28% rate in online gaming, racing and casinos. It may also consider the issue of the combined tax on goods and services in ocean freight, which was removed by the Supreme Court.
“The Center has not yet made a decision and is only studying the case. It will take any decision after discussing it with the council, ”another official told ET.