The Goods and Services Tax seems to be a fairly recent concept and this has been
the start of a new chapter along the lines of taxation. The complex structure of
taxation was replaced by the comprehensive indirect taxes levied on the supply
of goods and services which has enhanced the control of taxes and streamlined
various levels of taxation into a single system.
Taxation has seen various landmark cases however the confusion as to settlement
of taxes and implementation of new principles of GST in a federal system was
clarified in the infamous case Union of India V M/S Mohit Minerals Pvt. Ltd.
The Supreme Court in this case has adjudged has far-reaching implications,
extending beyond the specific issue of Integrated Goods and Services Tax (IGST)
on ocean freight under the Reverse Charge Mechanism (RCM) for CIF imports but
also has dealt with the underlying principle of federal system with respect to
GST and the impact of GST Council's recommendations.
This case commentary aims to dissect and analyze the key aspects of the
judgment, focusing on the constitutional framework of the Goods and Services Tax
(GST) law, the concept of composite supply, and its impact on the GST Council's
recommendations narrowed down to the federal system structure.
The Hon'ble Supreme Court, in its decision dated May 19, 2022, upheld the
Gujarat High Court's ruling, asserting that no IGST is payable on ocean freight
under RCM for CIF imports. The judgment emphasizes that such transactions
constitute a composite supply of goods, invoking Section 2(30) of the Central
Goods and Services Tax (CGST) Act.
The section 2(30) states as follows:
"Composite Supply means a supply made by a taxable person to a recipient
consisting of two or more taxable supplies of goods or services or both, or any
combination thereof, which are naturally bundled and supplied in conjunction
with each other in the ordinary course of business, one of which is a principal
Furthermore, the case was held by the Hon'ble Supreme Court on the matters of
IGST freight and acceptability of the recommendations of the GST Council. As a
brief, in the adjudication of Union of India vs. M/s Mohit Minerals Pvt. Ltd.,
the crux of the matter lies in the intricate realm of the Goods and Services Tax
(GST) and its constitutional underpinnings. The contention at hand is
intricately woven into the legislative annals and the character of
recommendations proffered by the Goods and Services Tax Council. The case
entails a meticulous examination of statutory provisions which includes Article
246A, 269A and 279A and the architecture of the Integrated Goods and
Services Tax (IGST) Act, with a particular emphasis on the matter of purported
The Goods and Services Tax Council, as ordained by Article 279A of the
Constitution, shoulders the responsibility of tendering recommendations to both
the Union and the States on diverse facets of the GST. The authority to
legislate on GST rests with the Parliament and State legislatures, albeit within
defined parameters. The IGST Act and the Central Goods and Services Tax (CGST)
Act meticulously articulate the concept of reverse charge and identify the
entity subject to taxation for these specified purposes. Moreover, the IGST Act
duly recognizes the place of supply of services, deeming it as the destination
of goods when the supplier is positioned outside India.
The recommendations of the GST Council, characterized by their recommendatory
nature, refrain from constituting binding edicts. The case meticulously probes
into the constitutional ramifications of these recommendations and their
consequential impact on the legislative machinery. Additionally, it necessitates
a scrutinizing gaze at the principles of federalism and the nuanced distribution
of legislative authority between the Union and the States, particularly within
the realm of taxation.
In essence, the case provocatively raises pivotal inquiries concerning the
constitutional soundness of the GST framework, the advisory nature of
recommendations emanating from the GST Council, and the extent of authority
delegated to the Council. It also engages with the intricate interplay between
federal and state jurisdictions in the domain of taxation laws, providing
profound insights into the labyrinthine complexities of the GST regime and its
attendant legal ramifications.
The appellant, the Union of India, asserts that the recommendations put forth by
the Goods and Services Tax (GST) Council bear a recommendatory character and do
not possess the status of binding edicts. Their argument underscores that the
authority to legislate on matters related to the GST is explicitly entrusted to
the Parliament and State legislatures, subject to well-defined conditions.
The appellant accentuates the constitutional framework underpinning the GST,
underscoring the pivotal role of the Council in formulating recommendations for
both the Union and the States. Furthermore, the appellant expresses reservations
regarding the perceived excessive delegation of powers to the Council and
endeavors to scrutinize the constitutional ramifications emanating from the
With a special emphasis on the case K.P. Varghese V ITO
, the arguments of the
appellant counsel were to enunciate that the bill can be referred for the
purpose of ascertaining the mischief that is sought to be remedied by the
legislation and enacted. The other cases which enunciated that the
recommendation has persuasive effect is Naraindas Indurkhya V State of Madhya
Moreover, the contention of the Union is that the recommendations of the GST
Council are binding since Parliament and the State legislatures have agreed to
align themselves with the recommendations as is evident from the provisions of
the IGST Act and CGST Act. Certain provisions of the IGST Act, CGST Act and SGST
Acts expressly provide that the rule-making power delegated to the Government
shall be exercised on the recommendations of the GST Council. For instance,
Section 5 of the IGST Act provides that the taxable event, taxable rate and
taxable value shall be notified by the government on the "recommendations of the
In essence, the appellant's assertions pivot around the constitutional soundness
of the GST framework, the advisory nature of the GST Council's recommendations,
and the nuanced distribution of legislative authority between the Union and the
States within the sphere of taxation laws.
The respondent, M/s Mohit Minerals Pvt. Ltd., posits that importers engaged in a
CIF contract lack direct privity of contract with the provider of transportation
services, as their payments are not remitted directly to the transporter.
They assert that the determination of taxable value should strictly adhere to
the explicit provisions articulated in the Central Goods and Services Tax (CGST)
Act and its corresponding rules, raising objections to certain notifications
prescribing valuation methodologies, deeming them in contravention of the
Integrated Goods and Services Tax (IGST) Act.
The respondent, expressing reservations about the identification of the Indian
importer as the primary recipient of services, challenges the Union Government's
approach to categorizing the two transactional phases as either distinct or
interconnected, highlighting concerns about the basis of convenience.
The cases of the apex court which reiterates that the recommendations could not
create binding or enforceable rights on the Union or the States with respect to
any of the recommendations which are in contradiction to a 'direction' or a
Furthermore, the respondent meticulously addresses the intricacies of the
reverse charge mechanism under the IGST Act, accentuating the limitations on the
government's authority to stipulate the party responsible for discharging
service tax obligations.
In rendering its judgment, the Supreme Court of India meticulously scrutinized
the constitutional underpinnings of the Goods and Services Tax (GST) and
dissected the character of recommendations proffered by the Goods and Services
Tax Council. The Court conducted a comprehensive examination of the legislative
lineage of the GST framework, placing particular emphasis on the statutory
tenets embedded in the Integrated Goods and Services Tax (IGST) Act. This
scrutiny primarily honed in on the nuanced issue of whether there existed an
impermissible level of delegation of authority.
The apex court, in its pronouncement, affirmed that the recommendations tendered
by the GST Council are marked with a recommendatory character and do not bear
the hallmarks of binding edicts. It underscored that the constitutional
prerogative to legislate on matters pertaining to the GST resides with the
Parliament and State legislatures, albeit subject to delineated conditions.
Further accentuating the constitutional tapestry of the GST, the Court shed
light on the pivotal role played by the Council in formulating recommendations,
underscoring its consultative nature with both the Union and the States.
On the matter of excessive delegation, the Court engaged in a meticulous
examination of the provisions enshrined in the IGST Act and the Central Goods
and Services Tax (CGST) Act. The objective was to gauge the extent of authority
delegated to the GST Council. The Court judiciously concluded that the
recommendations, characterized by their recommendatory essence, did not
transgress the bounds of excessive delegation. It held that these
recommendations, far from encroaching upon the legislative domain of the
Parliament and State legislatures, served a supplementary and advisory role.
Furthermore, the judicial pronouncement delved into the intricate tapestry of
the GST regime, unraveling its legal ramifications within the broader framework
of federalism and the demarcation of legislative authority between the Union and
the States. The Court's elucidation provided profound insights into the
constitutional validity of the GST framework, elucidating the nature of
recommendations propagated by the GST Council, and delineating the delicate
equilibrium between federal and state powers, especially in the realm of
In conclusion the judgement rendered by the Hon'ble Supreme Court affirms that
the recommendations of the GST council stand as a recommendation and does not
have any binding effect on the Union or the States. Moreover, the constitutional
validity of GST framework was upheld and that the distribution of powers between
the Union and the States with respect to taxation laws are affirmed.
The case commentary has been curated to show emphasis on the regulations based
on the recommendations of the GST Council and the impact and binding effect on
the Union and the States. This helps in understanding the constitutional
framework with respect to the GST regime and has enhanced the significance of
the guidelines for the implementation of the GST framework.
The landmark judgment of Union of India V Mohit Minerals Pvt. Ltd
profound implications for the GST domain and the authority embedded with the GST
Council recommendations The judgment, marked by meticulous analysis, emerges as
a benchmark for future interpretations and applications of GST laws, providing
stakeholders and legal practitioners with a comprehensive guide to navigate the
dynamic terrain of indirect taxation in the country. The case not only addresses
specific concerns but also establishes a broader precedent, molding the contours
of GST jurisprudence and refining the comprehension of legal principles that
underlie the GST framework.
In conclusion, the Supreme Court's judgment in Union of India v. M/s Mohit
Minerals Pvt. Ltd.
holds significant implications for the GST regime in India
with respect to future needs on GST guidelines and serves as a precedent for all
the issues which rise in the forte of GST Council recommendations.
- Central Goods and Services Tax (CGST) Act, 2017, � 2, sub � 30
- India Const. art. 246, amended by The Constitution (One Hundred and First Amendment) Act, 2016
- India Const. art. 269, amended by The Constitution (Eightieth Amendment) Act, 2000
- India Const. art. 279, amended by The Constitution (One Hundred and First Amendment) Act, 2016
- (1981) 4 SCC 173
- (1974) 4 SCC 788
- Integrated Goods and Services Tax Act, 2017, � 5
- Union of India v. Pradip Kumar Dey, (2000) 8 SCC 580; Kesoram Industries and Cotton Mills Ltd. v. CWT, (1966) 2 SCR 688; Som Mittal v. Government of Karnataka, (2008) 3 SCC 753; State of AP v. T. Gopalakrishnan Murthi, (1976) 2 SCC 883