Goods and Services Tax Council: Structure and Functions Explained for UPSC SSC

Formation and Constitutional Basis

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

The Council is a unique example of cooperative federalism. It brings together the Union and State governments to decide on a common tax policy. This structure was essential for implementing a uniform GST regime, replacing multiple central and state taxes. The recommendations of the GST Council are highly influential in shaping the GST laws and their implementation.

Composition of the 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 levels, facilitating consensus-building on complex tax matters.

Currently, there are 33 members in the GST Council. This includes the Union Finance Minister, the Union Minister of State (Revenue), and 31 state/UT representatives (28 states and 3 Union Territories with legislatures Delhi, Puducherry, Jammu & Kashmir). The 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, and the votes of all the State Governments taken together have a weightage of two-thirds of the total votes cast.

Key Functions and Powers

The GST Council makes recommendations on various aspects of GST. These include the taxes, cesses, and surcharges to be subsumed under 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 place of supply are also decided by the Council.

Furthermore, the Council recommends threshold limits for exemption from GST. It also decides on the rates, including floor rates with bands, of GST. Any special provisions with respect to certain States, such as Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, and Uttarakhand, are also determined by the Council. It also recommends 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 decision-making process in the GST Council is designed to ensure broad consensus. Every decision of the GST Council is taken by a majority of not less than three-fourths of the weighted votes of the members present and voting. This supermajority requirement emphasizes the cooperative federalism aspect. The Central Government's vote carries a weight of one-third of the total votes cast.

The votes of all the State Governments together carry a weight of two-thirds of the total votes cast. This weighted voting mechanism ensures that neither the Centre nor the States can unilaterally impose decisions. It necessitates dialogue and compromise, making the GST Council a powerful forum for fiscal policy coordination in India. The recommendations of the Council are not legally binding on the Union and State Governments, but they are generally followed to maintain uniformity and avoid disputes.

Important Keywords Explained

Article 279Aact

This constitutional article provides for the establishment of the Goods and Services Tax Council. It was inserted by the Constitution (One Hundred and First Amendment) Act, 2016, to facilitate the implementation of a uniform GST regime across India. It defines the composition and functions of the GST Council, making it a crucial part of India's fiscal federalism.

Cooperative Federalismconcept

A concept where the central and state governments work together to achieve common goals, often sharing powers and responsibilities. The GST Council is a prime example of cooperative federalism in India, as it brings together representatives from both levels of government to make joint decisions on indirect tax policy, ensuring a harmonized approach.

Constitution (101st Amendment) Actact

This landmark constitutional amendment, passed in 2016, introduced the Goods and Services Tax (GST) in India. It inserted new articles, including Article 279A, which established the GST Council. The amendment aimed to simplify the indirect tax structure, eliminate cascading effects, and create a common national market for goods and services.

Additional Facts & Context

• The GST Council has 33 members (Union FM, Union MoS (Revenue), and 31 state/UT representatives).
• The first meeting of the GST Council was held on September 22-23, 2016.
• The GST regime was implemented in India from July 1, 2017.
• The Council recommends the threshold limit for GST exemption, currently 20 lakh ( 10 lakh for special category states).
• Five petroleum products are currently outside the ambit of GST, awaiting the Council's recommendation for inclusion.