IMPORTANT POINT
The main legal point established in the judgment is the requirement for reasonable classification in taxation laws, as mandated by Article 14 of the Constitution of India. The court emphasized the need for a reasonable, natural, and substantial distinction in the nature of the class or classes upon which the law operates, and the consideration of socio-political effects in taxation decisions.

ORDER :

1. The petitioners have filed this petition seeking the following relief(s):-

“10.A That this Hon'ble Court may kindly be pleased to issue an appropriate writ/order/direction thereby directing the respondents to produce the entire records before the Hon'ble Court.

10.B That this Hon'ble Court may kindly be pleased to quash the impugned recommendations of the GST Council being void ab initio.

10.C That this Hon'ble Court may kindly be pleased to strike down the impugned notification no 8/2017- Central Tax dated 27.06.2017 (Annexure P/1) holding it to be ultravires.

10.D Any other relief this Hon'ble Court deems fit and proper may be passed.”

2. Petitioner No. 1 is Small Scale Ice Cream Manufacturer Association and Petitioner No. 2 is its Vice President. It is pleaded in the petition that the petitioners were subjected to various taxes like VAT, Service Tax, Luxury Tax etc., however with the enforcement of the Goods and Service Tax Act (GST), various Central and State Taxes were unified. The main feature of the scheme is that the business or person who has opted to pay tax under this scheme can pay tax at a flat percentage of turnovers every quarter, instead of paying tax at a normal rate every month. The outer limit of Rs. 50 lacs of turnover has been extended to Rs. 75 lacs of turnover and was subsequently extended to Rs. 1.5 crores as provided under Section 10 of the GST Act. In order to control the revenue loss, the GST Council introduced a negative list of items on which benefits of the composition scheme shall not be extended. In the 17th meeting of the GST Council convened on 18th June 2017, certain resolutions were passed with regard to the approval of draft GST Rules and related Forms of adjustment of GST Rates on certain items etc. With regard to fitment/adjustment of GST Rates on certain items, particularly composition scheme on Ice Cream Manufacturers, it was observed as under:-

“8.4 Shri R.K. Tiwari, Additional Chief Secretary (ACS), Uttar Pradesh, stated that his State had a large number of SMEs falling within the annual turnover of Rs.1 crore and if all of them opted for Composition scheme, they would suffer a very large scale revenue loss to the tune of about Rs.50,000 crore. The Hon'ble Deputy Chief Minister of Gujarat stated that his State also had a very large number of SMEs. He proposed to increase the turnover limit for Composition scheme to Rs.75 lakh so that loss of revenue to the Government was comparatively less and suggested to keep the rate of tax at 2%. Dr. P.D. Vaghela, CCT, Gujarat, stated that originally, they had opposed the proposal to extend the benefit of Composition scheme to manufacturers as this could lead to evasion of tax. He stated that some industries should not be extended the benefit of Composition scheme as this could lead to windfall profit for them, particularly where the rate of tax on inputs was Nil. He gave the example of the Ice Cream Manufacturing Units which would procure milk at the Nil rate of tax and pay minimal duty on their final product. He further observed that the rate of tax of 2% under the Composition scheme for manufacturers was too low. He also pointed out that only three States extended the benefit of Composition scheme to manufacturers.”

3. The Council approved rates of GST on the supply of goods as under:-

(i) For the Composition scheme to increase the annual turnover threshold from Rs. 50 lakh to Rs. 75 lakh for eligible taxpayers and to have a list of manufacturers who shall be ineligible for the Composition scheme. However, no clear decision was taken regarding the applicability of this decision to the Special Category States;

(ii) To tax insulin formulations of all types at the rate of 5% instead of the proposed rates of 12%/5%;

(iii) To exempt tax on children's pictures, drawings or colouring books instead of the proposed tax rate of 12%

(iv) To tax bamboo furniture at the rate of 18% instead of the proposed rate of 28%;

(v) Approved the exemption from IGST on