Goods and Services Tax Council: Structure and Functions Explained

Constitutional Basis

The Goods and Services Tax (GST) Council is a constitutional body established under Article 279A of the Indian Constitution. This article was inserted by the Constitution (One Hundred and First Amendment) Act, 2016. This amendment paved the way for the implementation of GST in India. The President of India constituted the GST Council on September 15, 2016. Its primary role is to make recommendations to the Union and State Governments on issues related to GST. This ensures a harmonized framework for indirect taxation across the country.

Article 279A specifies the composition and functions of the Council. It mandates that the Council shall be a joint forum of the Centre and the States. This unique structure reflects the cooperative federalism principle in India's tax administration. The recommendations of the GST Council are crucial for the smooth functioning and evolution of the GST regime. It acts as the apex decision-making body for all GST-related matters, from tax rates to exemptions and administrative procedures.

Composition of Council

The GST Council is chaired by the Union Finance Minister. The Union Minister of State in charge of Revenue or Finance is a member. The Finance Minister or any other Minister nominated by each State Government is also a member. This composition ensures representation from both the Central and State governments. The Chairperson of the Central Board of Indirect Taxes and Customs (CBIC) is a permanent invitee to all proceedings of the Council, but without voting rights.

The Council's decisions are taken by a majority of not less than three-fourths of the weighted votes of the members present and voting. The vote of the Central Government has a weightage of one-third of the total votes cast. The votes of all the State Governments taken together have a weightage of two-thirds of the total votes cast in that meeting. This weighted voting mechanism ensures that neither the Centre nor the States can unilaterally impose decisions, promoting consensus-building.

Key Functions and Powers

The GST Council makes recommendations on various aspects of GST. These include the taxes, cesses, and surcharges levied by the Union, the States, and local bodies which may be subsumed in GST. It also recommends the goods and services that may be subjected to, or exempted from, GST. The model GST laws, principles of levy, apportionment of GST levied on inter-State supplies, and the principles that govern the place of supply are also decided by the Council.

Further, the Council recommends the threshold limit of turnover below which goods and services may be exempted from GST. It also decides on the rates, including floor rates with bands, of GST. Any special provision with respect to the North-Eastern States, Jammu and Kashmir, Himachal Pradesh, and Uttarakhand is also determined by the Council. It also makes recommendations on the date on which petroleum crude, high-speed diesel, motor spirit (petrol), natural gas, and aviation turbine fuel shall be subjected to GST.

Decision Making Process

The GST Council operates through a consensus-driven approach. While the voting mechanism exists, most decisions are arrived at through deliberation and agreement among members. This collaborative spirit is essential for maintaining the cooperative federalism envisioned by the GST framework. The Council holds regular meetings to discuss and resolve issues related to GST implementation and policy. These meetings are crucial for addressing concerns raised by various stakeholders and adapting the tax regime to economic realities.

Any dispute arising out of the recommendations of the Council shall be resolved by the Council itself. This includes disputes between the Government of India and one or more States, or between two or more States. The Council has the power to establish a mechanism to adjudicate any dispute. This self-resolution mechanism underscores the Council's autonomy and its role as the primary arbiter of GST-related matters in India.

Important Keywords Explained

Article 279Aact

This article of the Indian Constitution provides for the establishment of the Goods and Services Tax Council. It defines its composition, functions, and the mechanism for decision-making, ensuring a joint forum for the Centre and States on GST matters. It was inserted by the 101st Constitutional Amendment Act, 2016.

Cooperative Federalismconcept

A principle where the central and state governments work together on common issues, sharing power and responsibilities. The GST Council is a prime example, as both levels of government collaborate to make decisions on indirect taxation, ensuring a unified approach while respecting state autonomy.

101st Amendment Actact

The Constitution (One Hundred and First Amendment) Act, 2016, introduced the Goods and Services Tax (GST) in India. It inserted new articles like 246A, 269A, and 279A into the Constitution, granting concurrent powers to the Centre and States to levy GST and establishing the GST Council.

Additional Facts & Context

• The first meeting of the GST Council was held on September 22-23, 2016.
• As of early 2024, there have been over 50 meetings of the GST Council.
• The GST Council has recommended subsuming 17 major indirect taxes and 13 cesses into GST.
• The threshold limit for GST registration for goods is typically 40 lakh ( 20 lakh for special category states).
• The GST Council has established a four-tier tax structure: 5%, 12%, 18%, and 28%.