The Madras High Court held that the Goods and Services Tax (Compensation to States) Act, 2017 is only directory and not mandatory and there is no mechanism to deal with non-compliance with the timeline.
The petitioner, G.Sundarrajan is a Graduate in Engineering from Annamalai University and also claims to be the Managing Trustee of “Poovulagin Nanbargal” Friend of Earth/Globe, which is a registered Public Trust, which aims at creating an environment law awareness among the people of Tamil Nadu by promoting sustainable development and campaigning for organic and safe food and the Trust also publishes a couple of monthly journals on environment and related issues.
The petitioner submitted that in terms of Section 7 of the Goods and Services Tax (Compensation to States) Act, 2017 obligation is cast upon the Union of India to provide for timely and speedy disbursal of compensation in pursuance of provisions of Section 18 of the Constitution (101st Amendment) Act, 2016.
The petitioner drew the attention of the Court to the Press Release dated August 31, 2020 issued by the Director of Information and Public Relations, Government of Tamil Nadu, Chennai, and would submit that the Press Release contains a Letter of the Chief Minister of Tamil Nadu addressed to the Prime Minister of India.
The letter stated that the difficulties faced by the State of Tamil Nadu, in the light of COVID-19 pandemic virus have been stated and a request has also been made for provision of a mechanism in and by which the Government of India raises required funds as loan and lends it to the GST Compensation Fund against future cess receipts, so that GST compensation can be paid in full to the States in 2020-21.
Also made a request that the Government of India shall ensure that the States shall get their full dues of the compensation in the current year itself and reduce neither the compensation payable nor the already announced and committed additional borrowing permissible to States of 2% of GSDP under the Atma Nirbhar Bharat Stimulus Package in any circumstances and despite the said request made by one of the important Constitutional Functionaries.
The division judge bench of Justice M. Sathyanarayan and Justice R. Hemlatha observed that the mere employment of the word “shall” in Section 7(1) of the Goods and Services Tax (Compensation to States) Act, 2017 cannot be construed as mandatory in the light of the ratio laid down in the above-cited decisions and it depends upon the context and the purpose of the legislative intent also.
The court also noted that the Goods and Services Tax (Compensation to States) Act, 2017, does not deal and speak about the consequences of non-compliance of the timeline stipulated under Section 7(2) of the Act and therefore, it can be construed only as directory and not mandatory.
The court said that whatever difficulties faced by the Government of Tamil Nadu in lieu of the economic meltdown due to the COVID-19 pandemic virus, may have equal application to the Union of India also.
“This Court also hope and trust that the Union of India would take into account the difficulties being faced by the States, especially the State of Tamil Nadu in the light of the contents of the Press Release dated 31.08.2020 issued by the Director of Information and Public Relations, Chennai-9,” the court said.
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