GST Federalism: Constitutional Framework, Legislative Powers and GST Council

From Parliament to the GST Council: How India’s Constitution Enables Cooperative GST Federalism

Summary: The Goods and Services Tax (GST) represents a constitutional transformation of India’s indirect tax system, introduced through the Constitution (One Hundred and First Amendment) Act, 2016, which inserted Articles 246A, 269A and 279A to establish a framework in which Parliament and State Legislatures exercise GST legislative powers while the GST Council provides a constitutional forum for Union-State coordination. The article examines the distribution of taxing powers, the legal status of GST Council recommendations, and the Supreme Court’s interpretation in Union of India v. Mohit Minerals Pvt. Ltd. It explains that the GST Council is neither a superior legislative body nor merely an administrative committee, but a constitutional institution designed to facilitate cooperation between different levels of government. The discussion considers Article 246A and simultaneous legislative competence, Article 269A and the framework for inter-State GST, and Article 279A and the Council’s composition, functions and voting mechanism. It also examines delegated legislation, including the relationship between GST Council recommendations and executive action under GST statutes, and discusses judicial developments involving VKC Footsteps and Dhruv Krishan Maggu. Recent policy developments, including the 56th GST Council meeting, are considered in the context of the continuing evolution of GST federalism. The article ultimately examines whether the constitutional framework adequately balances tax harmonisation with State fiscal autonomy while preserving meaningful Union-State consultation and constitutional legislative powers.

1. INTRODUCTION:

The introduction of the Goods and Services Tax (GST) on 1 July 2017 was one of the most significant developments in India’s indirect taxation history. Its importance, however, extends beyond the replacement of multiple Central and State indirect taxes with a common tax framework. GST required a fundamental restructuring of the constitutional distribution of taxation powers between the Union and the States. Before GST, the Constitution largely allocated different taxing fields between Parliament and State Legislatures through the Seventh Schedule. The Union exercised powers over taxes such as central excise duty and service tax, while States exercised powers over taxes such as sales tax and value added tax. The introduction of a destination-based tax on the supply of goods and services required these traditionally separate taxing powers to be reorganised.

The constitutional response came through the Constitution (One Hundred and First Amendment) Act, 2016, which introduced a special constitutional framework for GST. Among the most important provisions introduced were Article 246A, conferring simultaneous legislative power upon Parliament and State Legislatures in relation to GST; Article 269A, dealing with GST on inter-State supplies; and Article 279A, establishing the Goods and Services Tax Council. These provisions created a constitutional model in which taxation powers are shared while policy-making is coordinated through an institution representing both the Union and the States. The GST Council is consequently at the centre of India’s experiment with cooperative fiscal federalism.

The significance of this arrangement lies in the constitutional tension between tax harmonisation and State fiscal autonomy. A common GST system requires substantial uniformity in rates, exemptions, classification and procedures. At the same time, the Constitution does not completely remove the legislative competence of State Legislatures. Article 246A expressly gives them power to legislate on GST, subject to the special rule applicable to inter-State supplies. The resulting framework therefore differs from a conventional system in which one level of government possesses exclusive authority over a particular tax.

The constitutional relationship became particularly significant in Union of India v. Mohit Minerals Pvt. Ltd., where the Supreme Court examined whether recommendations made by the GST Council were binding upon Parliament and the State Legislatures. The Court held that the Council’s recommendations are not binding on the legislatures when they exercise their primary legislative power under Article 246A. At the same time, the Court recognised the importance of the GST Council as a constitutional mechanism for dialogue and cooperation between the Union and the States.

This article examines the constitutional foundations of GST, the distribution of legislative powers under Articles 246A and 269A, the role and legal status of the GST Council under Article 279A, and the judicial interpretation of these provisions. It further analyses whether the present framework successfully balances national tax uniformity with federal fiscal autonomy and considers recent developments that demonstrate the continuing evolution of GST constitutional law.

2.LEGAL FRAMEWORK ON GST:

2.1 Constitutional Foundation of GST

The constitutional foundation of the Goods and Services Tax lies primarily in the Constitution (One Hundred and First Amendment) Act, 2016. The introduction of GST required a constitutional amendment because the pre-GST framework divided taxation powers between the Union and the States through different entries in the Seventh Schedule. The Union exercised powers over taxes such as central excise duty and service tax, whereas States exercised powers over sales tax and value added tax. A comprehensive tax on the supply of goods and services could not effectively operate within this fragmented allocation of taxing powers. The 101st Constitutional Amendment therefore created a separate constitutional framework for GST by inserting Articles 246A, 269A and 279A, while making consequential amendments to provisions dealing with taxation and distribution of revenue. The Amendment represents a significant constitutional shift because it seeks to combine a common national tax structure with continued participation of State Legislatures.

Article 366(12A) provides the constitutional definition of GST 2as a tax on the supply of goods, services or both, except taxes on the supply of alcoholic liquor for human consumption. This definition is significant because it establishes the constitutional subject matter of GST and distinguishes it from the earlier taxation

2 Article 366(12A) provides the constitutional definition of GST

system based on separate taxable events such as manufacture, sale and provision of services. The constitutional framework also makes special provisions concerning certain petroleum products, demonstrating that the Constitution itself determines important boundaries of the GST regime.

2.2 Article 246A – Simultaneous Legislative Powers

Article 246A is the central constitutional provision governing GST legislative competence. It provides that, notwithstanding Articles 246 and 254, Parliament and, subject to Article 246a(2), every State Legislature have the power to make laws with respect to GST. Article 246a(2), however, gives Parliament exclusive power to make laws concerning GST where the supply takes place in the course of inter-State trade or commerce. Consequently, the Constitution establishes a distinction between intra-State and inter-State supplies. Parliament and State Legislatures possess simultaneous legislative competence over GST in their respective fields, whereas Parliament alone legislates on inter-State GST.

The importance of Article 246A lies in the fact that GST does not simply fit into the traditional constitutional model of distributing legislative subjects between the Union and the States. Instead, Article 246A itself creates the legislative competence for GST. This principle was examined by the Supreme Court in Union of India v. VKC Footsteps India Pvt. Ltd3., where the Court recognised the special constitutional character of Article 246A and explained that it creates simultaneous legislative power for Parliament and State Legislatures in relation to GST. The decision demonstrates that GST must be interpreted through its own constitutional framework rather than merely by applying the pre-GST division of taxing powers.

2.3 Judicial Principle: Legislative Competence and Delegated Legislation

The decision in Union of India v. VKC Footsteps India Pvt. Ltd. is also significant for the principle that delegated legislation must remain within the boundaries of the parent statute. The case involved the interpretation of Section 54(3) of the Central Goods and Services Tax Act, 2017 and Rule 89(5) of the CGST Rules concerning refund of accumulated input tax credit in cases involving an inverted duty structure. Although the dispute primarily concerned the statutory refund mechanism, the judgment demonstrates the broader principle that rules made by the executive cannot exceed the authority granted by the legislature.

This principle is particularly relevant in GST because the administration of the tax depends substantially upon rules, notifications and delegated powers. The GST Council may make recommendations concerning tax policy, but such recommendations do not by themselves constitute primary legislation. Any rule or notification issued by the executive must therefore have a valid statutory basis and must operate within the limits prescribed by the parent legislation. The principle of ultra vires delegated legislation consequently acts as an important constitutional and administrative safeguard for taxpayers.

3 Union of India v. VKC Footsteps India Pvt. Ltd 2021 INSC 469

2.4 Article 269A – Constitutional Framework for Inter-State GST

Article 269A provides the constitutional basis for GST on supplies occurring in the course of inter-State trade or commerce. It provides that such GST shall be levied and collected by the Government of India and that the proceeds shall be apportioned between the Union and the States in the manner provided by Parliament by law on the recommendations of the GST Council. The provision also treats imports into India as inter-State supplies for GST purposes.

The constitutional principle underlying Article 269A is the need to prevent multiple and conflicting State taxation of inter-State transactions. Since an inter-State transaction may involve several jurisdictions, allowing every State to independently impose GST could undermine the objective of creating a common national market. Parliament’s exclusive legislative competence over inter-State GST under Article 246A(2), together with the collection and apportionment mechanism under Article 269A, therefore provides a constitutional mechanism for balancing national uniformity with the revenue interests of the States.

The statutory implementation of this constitutional framework is principally found in the Integrated Goods and Services Tax Act, 2017. The IGST mechanism allows tax collected on inter-State supplies to be appropriately apportioned while also providing rules concerning the place of supply. The constitutional arrangement therefore demonstrates that GST federalism is not based simply on dividing tax revenues but also on establishing a coordinated system for determining which jurisdiction has the relevant taxing interest.

2.5 Article 279A – Establishment and Functions of the GST Council

Article 279A establishes the Goods and Services Tax Council as a constitutional body. The Council consists of the Union Finance Minister as Chairperson, the Union Minister of State in charge of Revenue or Finance, and the Minister in charge of Finance or Taxation or another nominated Minister from each State. Its composition reflects the federal character of GST because both the Union and State Governments participate in the constitutional institution responsible for GST policy coordination.

The Council is empowered to make recommendations concerning a wide range of GST matters, including the taxes, cesses and surcharges that may be subsumed into GST, goods and services that may be subject to or exempted from GST, model GST laws, principles of levy, place-of-supply principles, threshold limits and GST rates. Article 279A(6) further provides that the Council shall be guided by the need for a harmonised structure of GST and the development of a harmonised national market. The constitutional objective is therefore not merely revenue collection but the creation of a coordinated indirect tax system across India.

2.6 Voting Mechanism and the Principle of Cooperative Federalism

The voting structure of the GST Council further reflects the constitutional objective of cooperation. Under Article 279A, the vote of the Central Government carries one-third of the total weighted votes, while the

votes of all State Governments together carry two-thirds. A proposal requires at least three-fourths of the weighted votes of members present and voting. This arrangement prevents either the Union or the States from ordinarily determining the Council’s recommendations through a simple majority.

The voting structure is therefore designed to encourage consensus, negotiation and inter-governmental cooperation. It recognises that GST affects both Union and State revenues and that significant changes to the tax structure should ideally emerge from consultation between the different levels of government. The constitutional design consequently gives institutional form to the concept of cooperative federalism, while still preserving the independent legislative powers granted by Article 246A.

2.7 GST Council Recommendations and Union of India v. Mohit Minerals

The legal status of GST Council recommendations was authoritatively considered by the Supreme Court in Union of India v. Mohit Minerals Pvt. Ltd. The dispute involved the levy of Integrated GST on ocean freight paid in connection with the import of goods under CIF contracts. However, beyond the immediate tax dispute, the judgment addressed a fundamental constitutional question: whether recommendations of the GST Council are binding upon Parliament and State Legislatures.

The Supreme Court held that GST Council recommendations are not binding on Parliament or State Legislatures in the exercise of their primary legislative power under Article 246A. The Court distinguished between the constitutional power to legislate and the constitutional function of making recommendations. Article 246A expressly confers legislative power upon Parliament and State Legislatures, whereas Article 279A establishes the GST Council as a body that makes recommendations. Treating every recommendation as binding would effectively give the Council legislative authority that the Constitution has not expressly conferred upon it.

The judgment therefore established an important principle of constitutional institutional balance. The GST Council is not a third legislative chamber and cannot replace Parliament or State Legislatures. At the same time, its recommendations remain constitutionally significant because the GST framework is based on cooperation and harmonisation. Further, where a GST statute specifically requires the executive to act on the recommendation of the Council while exercising delegated statutory powers, the relevant statutory requirement must be complied with. The judgment therefore maintains a distinction between primary legislative power and delegated executive power, which is essential to understanding GST federalism.

2.8. Legal Principle of Cooperative and Collaborative Federalism

The constitutional GST framework must ultimately be understood through the principle of cooperative federalism. GST required the Union and States to surrender or restructure several earlier taxation powers in order to establish a common indirect tax system. Instead of completely centralising GST, the Constitution created simultaneous legislative powers and established the GST Council as a permanent forum for Union-State consultation.

The Supreme Court’s reasoning in Mohit Minerals is particularly important because it recognises that cooperation does not require constitutional subordination. Parliament and State Legislatures can cooperate through the GST Council while retaining the legislative competence granted to them by Article 246A. Therefore, cooperative federalism under GST is better understood as a process of consultation, coordination and accommodation, rather than as a system in which one institution dictates the tax policy of all others.

2.9. Recent Policy Developments in GST

The constitutional GST framework continues to evolve through the recommendations of the GST Council and their subsequent implementation through legislation and delegated legislation. A significant recent development was the 56th GST Council meeting held on 3 and 4 September 2025, where the Council recommended substantial changes to the GST rate structure and several sector-specific measures. These included changes concerning goods and services, exemptions and rationalisation of rates. The recommendations demonstrate the continuing role of Article 279A in adapting the GST system to changing economic and policy requirements. (gstcouncil.gov.in)

The recent policy developments also reinforce the significance of the distinction established in Mohit Minerals. A GST Council recommendation represents the outcome of the constitutional deliberative process, but its implementation must take place through the appropriate legal mechanism. Where a change requires legislative amendment, Parliament or the concerned State Legislature must exercise its legislative power. Where the parent statute authorises delegated action, the executive must act within the statutory limits. This ensures that the practical implementation of GST policy remains connected to the constitutional allocation of powers.

2.10. Contemporary Judicial Approach to GST Powers

The continuing development of GST jurisprudence demonstrates that Article 246A is not merely a provision conferring the power to impose tax. Courts have also been required to consider the limits of executive authority, delegated legislation and enforcement powers under the GST statutes. In Dhruv Krishan Maggu v. Union of India4, for instance, the Delhi High Court considered challenges to GST provisions concerning arrest and other enforcement powers and examined the scope of legislative competence under Article 246A. The decision illustrates the broader judicial approach that the constitutional power to legislate on GST can extend to machinery and enforcement provisions sufficiently connected with the levy and collection of GST, while such provisions remain subject to constitutional and statutory limitations.

This developing jurisprudence demonstrates that GST federalism cannot be examined only through the question of who possesses the power to tax. It also requires examination of how that power is exercised, whether delegated authorities remain within statutory boundaries, and whether executive action can be constitutionally justified. Judicial review consequently operates as an important component of the GST

4 Dhruv Krishan Maggu v. Union of India WP (C) 5454/2020 & WP(C) 10130/2020

framework by ensuring that the Union, States and executive authorities remain within their respective constitutional and statutory powers.

The Constitutional Structure in One View

The relationship between the principal constitutional provisions can therefore be understood in a simple sequence: Article 246A provides the legislative competence for GST; Article 269A provides the framework for inter-State GST; Article 279A creates the GST Council for Union-State coordination; GST statutes translate constitutional powers into enforceable taxation rules; and judicial review ensures that legislative and executive action remains within constitutional and statutory limits.

This structure is what makes India’s GST model distinctive. The GST Council facilitates cooperation, but it does not replace the legislature; Parliament and State Legislatures possess constitutional legislative competence, while executive authorities remain subject to delegated legislative limits. The result is a constitutional framework that attempts to achieve tax harmonisation without completely eliminating the federal distribution of legislative power.

CRITICAL DISCUSSION:

A. Is the GST Council a Fourth Legislature?

One of the most important constitutional questions after the introduction of GST was whether the GST Council’s recommendations were legally binding upon Parliament and State Legislatures. If the answer were affirmative, the Council could effectively determine the content of GST legislation without itself being a legislative body. This would raise serious questions concerning legislative sovereignty and federalism.

The Supreme Court resolved this issue in Union of India v. Mohit Minerals Pvt. Ltd. The Court held that the recommendations of the GST Council are not binding on Parliament or State Legislatures in the exercise of their primary legislative power under Article 246A. The Court reasoned that Article 246A independently confers legislative power upon Parliament and State Legislatures, while Article 279A establishes the GST Council as a constitutional body making recommendations. The Constitution does not make Article 246A subordinate to Article 279A.

This distinction is fundamental. The GST Council does not constitute a third legislative chamber between Parliament and State Legislatures. Its role is to facilitate discussion, harmonisation and coordination. As TaxGuru’s discussion of Mohit Minerals also notes, treating GST Council recommendations as binding edicts would interfere with the constitutional distribution of GST legislative power.

B. Cooperative Federalism versus Legislative Autonomy

At first glance, the non-binding character of GST Council recommendations might appear inconsistent with the objective of maintaining a uniform GST system. If Parliament and States are constitutionally free to legislate differently, one could argue that the entire purpose of the GST Council may be weakened.

However, the opposite approach also creates difficulties. If GST Council recommendations were automatically binding upon Parliament and State Legislatures, the Council would exercise a form of legislative power without being constituted as a legislature. It could also restrict the constitutional legislative competence expressly granted to Parliament and State Legislatures by Article 246A.

The Supreme Court’s approach in Mohit Minerals attempts to navigate this tension. The Council’s recommendations are not legally binding upon the legislature, but they remain constitutionally significant because the Council provides the institutional forum through which the Union and States negotiate a common GST framework. The Court described Indian federalism as involving both cooperation and legitimate contestation rather than requiring one constitutional unit to permanently dominate the other.

In my view, this distinction is one of the most important features of India’s GST constitutional architecture. Cooperative federalism cannot mean that cooperation eliminates constitutional autonomy. Rather, cooperation must operate alongside the independent legislative powers granted by the Constitution.

C. Recommendations Are Different from Statutory Delegated Powers

The Supreme Court’s reasoning also requires an important distinction between primary legislation and delegated legislation. A recommendation made by the GST Council under Article 279A does not itself become an Act of Parliament or a State Legislature. However, GST legislation may specifically require the Government to act on the recommendation of the Council while exercising delegated statutory powers.

This distinction has become increasingly relevant in GST litigation. In a recent 2026 decision reported by the Madras High Court considered whether the Government could issue notifications under Sections 9 and 11 of the CGST Act that went beyond the GST Council’s recommendation. The Court held that delegated legislation could not travel beyond the statutory framework and the relevant GST Council recommendation.

This demonstrates that Mohit Minerals should not be misunderstood as saying that GST Council recommendations are legally irrelevant. Their legal significance depends upon the source and nature of the power being exercised. Parliament and State Legislatures retain primary legislative competence, but executive authorities exercising delegated powers must remain within the limits prescribed by the parent statute.

D. Practical Implications for Taxpayers

The constitutional distinction has direct practical significance for taxpayers. A taxpayer should not automatically treat every announcement or recommendation of the GST Council as an immediately enforceable change in law. A recommendation may need to be followed by an appropriate statutory amendment, notification, rule or other legally authorised measure before it produces the relevant legal consequence.

This distinction is particularly important when tax rates, exemptions, procedural requirements or compliance obligations are changed. Taxpayers and professionals must therefore distinguish between what the GST Council has recommended and what has actually become legally enforceable.

The distinction also provides taxpayers with a constitutional safeguard. Where an executive authority attempts to impose a liability without adequate statutory authority or travels beyond the limits of delegated power, the action may be challenged through judicial review. Thus, the constitutional architecture does not merely regulate relations between the Union and States; it can also directly affect the rights and obligations of taxpayers.

E. Does GST Reduce State Fiscal Autonomy?

A more fundamental issue concerns the effect of GST on State fiscal autonomy. GST has undoubtedly reduced the independent space available to States in relation to several indirect taxes because many earlier State taxes were subsumed into the GST framework. States now participate in a common system in which major issues such as rates, exemptions and structural changes are discussed through the GST Council.

However, it would be inaccurate to describe the constitutional scheme as completely centralised. Article 246A expressly gives State Legislatures legislative competence over GST, subject to the constitutional exception for inter-State supplies. The States also collectively possess two-thirds of the weighted voting power in the GST Council.

The real constitutional challenge is therefore one of balance rather than complete autonomy. GST requires States to accept a degree of harmonisation in return for participation in a common national tax system. The effectiveness of cooperative federalism depends on whether this balance continues to operate through meaningful consultation and constitutional respect for the respective roles of the Union and States.

F. Recent Developments and the Continuing Evolution of GST Federalism

The GST Council continues to play a significant role in shaping India’s indirect tax policy. Its recent meetings have dealt with changes to GST rates, exemptions and structural reforms. For example, the recommendations of the 56th GST Council meeting held in September 2025 involved significant changes to the GST rate structure and several sector-specific measures. This demonstrates that Article 279A is not merely a constitutional provision of historical importance but remains an active mechanism for coordinating tax policy.

At the same time, recent litigation demonstrates that the boundaries between constitutional recommendations, statutory powers and delegated legislation remain important. The continuing judicial scrutiny of GST notifications and executive action indicates that the constitutional architecture is still developing through case law.

CONCLUSION AND RECOMMENDATIONS:

The constitutional framework of GST represents a distinctive model of Indian fiscal federalism. Through the 101st Constitutional Amendment, the Constitution moved away from the earlier fragmented allocation of indirect taxation powers and created a system based upon simultaneous legislative competence, inter-State coordination and institutional cooperation. Article 246A gives Parliament and State Legislatures power to legislate on GST, while reserving exclusive power to Parliament over inter-State supplies. Article 269A establishes the constitutional framework for inter-State GST, and Article 279A creates the GST Council as the principal institutional forum for Union-State coordination.

The Supreme Court’s judgment in Union of India v. Mohit Minerals Pvt. Ltd. is particularly important because it prevents the GST Council from being treated as a superior legislative authority. Its recommendations are not binding upon Parliament and State Legislatures when they exercise their primary legislative power. At the same time, the Council remains constitutionally significant because GST requires continuous cooperation between the Union and States. The distinction between legislative competence and delegated executive power further ensures that government authorities cannot exceed the statutory authority granted to them.

In my view, the greatest strength of the GST constitutional framework is that it attempts to achieve national tax harmonisation without formally eliminating the legislative role of the States. However, the effectiveness of this model depends upon maintaining meaningful consultation, transparency and respect for constitutional boundaries. The GST Council should therefore continue to function as a genuine forum for federal dialogue rather than merely as a mechanism for formal approval of decisions. Greater transparency regarding the reasoning behind major recommendations, clearer communication distinguishing recommendations from legally operative measures, and stronger institutional mechanisms for resolving Union-State disputes would further strengthen the system. Ultimately, the success of GST federalism should not be measured only by uniformity of tax rates, but also by the ability of India’s constitutional institutions to cooperate without compromising their respective constitutional powers.

References

1. Constitutional and Legislative Sources: Constitution of India, Articles 246A, 269A, 270, 271, 279A and 366(12A); Constitution (One Hundred and First Amendment) Act, 2016; Central Goods and Services Tax Act, 2017; Integrated Goods and Services Tax Act, 2017.

2. Judicial Authorities: Union of India v. Mohit Minerals Pvt. Ltd., (2022) 10 SCC 700; Union of India v. VKC Footsteps India Pvt. Ltd., (2022) 2 SCC 603.

3. Union of India v. Mohit Minerals Pvt. Ltd (2022) SCC OnLine SCC 657

4. Union of India v. VKC Footsteps India Pvt. Ltd 2021 INSC 469

5. Dhruv Krishan Maggu v. Union of India WP (C) 5454/2020 & WP(C) 10130/2020

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Author – Dinesh Kumar T, Lovely Professional University, Phagwara, Punjab | EMAIL ID: [email protected]