Will 28% GST on real money gaming & casinos pose a unique constitutional crisis in post GST era?

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Last year, the Supreme Court held that the recommendations of the GST Council are not binding on the Parliament and State Legislatures. The apex court opined that had the Parliament intended to make recommendations of the GST Council mandatory the concerned article 279A of the Constitution would have said so explicitly.The recommendations pertaining to rate revisions that do not require amendments to GST Acts are binding only in certain cases.

The Court held as follows:

The Parliament and the State legislatures possess simultaneous power to legislate on GST. Article 246A does not envisage a repugnancy provision.

This decision also means states can refuse to implement the decisions of the GST Council and fix their own different rates of tax, grant exemptions and relaxations.

On Tuesday, the GST Council recommended 28% GST on full face value of online gaming, casinos, and horse racing. This is a major decision considering the fact that all states require to amend the state GST enactments while the central government needs to amend CGST and IGST Acts for implementation.

So this means, the 28% tax rate for real money gaming won’t come into force until and unless all states amend their existing law on GST.

Here comes Goa, that is adamant about the increased tax rate for casinos in the tourist state. Goa is the reason that the decision took so long or in other words delayed by close to one year. It is on Goa’s demand the GST Council referred the matter last year to GoM for the second time.

“I’ve spoken to the Chief Minister, and he said he will take it up. So ultimately, it will go to the GST council for reconsideration — it has to go,” Mauvin Godinho, the Goa’s representative said after the Council meet.

This was followed by comments by Priyank Kharge, the influential minister in Karnataka government. Kharge said 28% GST would hamper India’s goal of $1 trillion economy.

Now can Karnataka & Goa refuse to pass amendments to the state GST Act? Can this indefinitely delay the implementation of the Tuesday’s decision of the Council? Answer seems to be yes. It is all within the powers of Karnataka & Goa state assemblies. If this becomes true, this will result in a unique scenario that has not been witnessed since the implementation of the GST.

Until now, all decisions of the GST Council were taken with consensus of union and state governments agreeing on tax rates irrespective of the fact that some states are staunch opponents of ruling BJP. Even the Tuesday’s decision was taken without voting while even one state could have pushed for a vote. Goa didn’t do so.

For now, we have to wait and watch.