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December 2, 2020
All Articles by: Mr.M. GOVINDARAJAN       View Profile
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Goods and Services Tax was introduced with effect from 01.07.2020.  The GST laws provide for the levy of Central Tax, State Tax, Union Territory Tax, Integrated Tax and Cess.  Section 9 of the Central Goods and Services Tax Act, 2017/State Tax Act/ Union Territory Tax Act provides for the levy of a tax called the central tax/State tax/Union territory tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding 20%  as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person.  Each and every goods and services which are liable to GST are liable both the Central Tax and State tax on intra State supplies.  Therefore the maximum rate of tax will be 40%.  The integrated tax is levied by the Central Government not exceeding the rate 40%.  Some categories of goods and services are liable to pay tax under reverse charge mechanism. 

Section 8(2) of the GST (Compensation to States) Act, 2017 provides that the cess shall be levied on such supplies of goods and services as are specified in column (2) of the Schedule, on the basis of value, quantity or on such basis at such rate not exceeding the rate set forth in the corresponding entry in column (4) of the Schedule, as the Central Government may, on the recommendations of the Council, by notification in the Official Gazette, specify.

The Central Government has exempted many of the goods/services from the levy of the tax.  The tax rates are generally at 5%, 12%, 18% and 28%.  The tax rates are reduced to some goods/services and some tax rates are increased for some goods/services by the Government as per exigencies on the recommendations of the GST Council.

Many a litigation arises challenging the constitutional validity of the Act or provisions of GST laws.  But the challenge of tax rates has not been emanated.    Public interest litigation has been filed to reduce the rate of masks and Sanitizers. 

In GAURAV YADAV AND ANR. VERSUS UNION OF INDIA AND ORS. - 2020 (8) TMI 376 - DELHI HIGH COURT a public interest litigation has been filed by the petitioner before Delhi High Court in regard to sanitizers and the reduction of GST for such sanitizers.  The petitioner prayed before the High Court the following-

  • An appropriate writ in the nature of Mandamus or any other appropriate Writ, Order, directions of like nature directing the Respondent No.1 to extend the Notifications dated 12/03/2020 and 21/03/2020 thereby classifying masks and sanitizers as ‘Essential Commodity’ under the Essential Commodity Act, 1955 and fixing the retail prices of the said products.
  • An appropriate writ in the nature of Mandamus or any other appropriate Writ, Order, directions of like nature directing the Respondent No. 2 and 3 to reduce the GST rate of 18% on alcohol based sanitizers to either 5% or 12%.
  • Such other and further orders and/ or directions as the High Court may deem fit and proper in the fact and circumstances of the case.

The High Court observed that during the initial period of spread of the COVID – 19 pandemic masks and sanitizers were introduced in the ‘Essential Commodities’ under the Essential Commodities Act, 1955 vide Notification dated 13.03.2020 which was extended up to 30.06.2020.  Thereafter no extension was granted by the Central Government.   Vide Notification date 21.03.2020 the Central Government regulated the price of masks and sanitizers.  Against this the petitioner filed the present public interest litigation before the High Court.

The Central Government, vide Office Memorandum dated 01.07.2020 in which it has been stated that the inclusion of masks and sanitizers under the Essential Commodities Act is not continued further since no longer any adverse reports from States and Union Territories regarding availability and price of the said masks and sanitizers.

The petitioner contended that in the absence of regulation, the manufacturers and traders may take advantage of the situation.

The High Court did not grand the prayers of the petitioners on the following grounds-

  • Inclusion of goods under the Essential Commodities Act, 1955 as ‘Essential Commodity’, is a policy decision of the respondent/Government which is a complex decision based upon varieties of factors such as availability, price etc. 
  •  Unless the decision can be shown to be manifestly unreasonable or arbitrary, the High Court will be extremely slow in interfering with the policy decision of the Government.
  • In the opinion of the Government, masks and sanitizers are now easily available and there is no need to control such commodities or to regulate supply etc. of these commodities.   Therefore the Notification dated 13.03.2020 has not been extended beyond 30.06.2020 and also came to the conclusion that there is no need to control the price of the masks and sanitizers.
  • The petitioners have not brought any material on record to demonstrate that the basis for the decision of the respondents is erroneous in any manner.  The petitioner accepted that these commodities are now generally available.
  • Unless there is a cogent need for regulation, it cannot be said that normally the items should be included under the Essential Commodities Act, 1955. 
  • Even during the period of coverage of masks and sanitizers under the Act, the only regulation in place was about the price of the aforesaid two commodities as is clear from the notification dated 21.03.2020.  There was no further restriction at all except regarding the price of the said two commodities in the notification dated 21.03.2020. The contentions about regulation of quality of these products, as sought to be raised in the petition, are therefore not relevant to the relief sought.
  • The High Court did not see any reason to issue mandamus and direct the respondents to extend the notification dated 13.03.2020 or to include the masks and sanitizers as ‘Essential Commodities’ under the Essential Commodities Act, 1955.

The Central Government assured the High Court that the Government will monitor the situation carefully and take remedial action if required.

In regard to reduction of GST tax rates on masks and sanitizers, the High Court held that the rate of tax cannot be challenged in a Court of law unless it is abundantly confiscatory in nature.  In the present case nothing has been argued out about how the present rate of GST is confiscatory in law.   Merely, because this petitioner feels that the GST rate applied on masks and sanitizers is excessive, this cannot be a reason for issuing a writ of mandamus and direct the respondents to reduce tax on the said commodities.

The High Court dismissed the writ petition filed the writ petitioner.


By: Mr.M. GOVINDARAJAN - December 2, 2020



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