The Goods and Services Tax Council is a constitutional body that is responsible for managing all aspects of the Goods and Services Tax (GST) in India. This includes decisions on tax rates, administration, and other related matters. In this article, we will discuss the role of the GST council and its importance for businesses in India.
Why do we need a GST Council?
The GST Council serves as the principal committee responsible for amending, reconciling, or enacting any laws or regulations pertaining to the Goods and Services Tax (GST) in India. Chaired by the Union Finance Minister of India, the council is supported by finance ministers from all Indian states.
The most recent council meeting, the 52nd GST council meeting, took place on October 7th, 2023.
As the key decision-making body, the GST Council determines tax rates, exemptions, GST return deadlines, tax laws, and compliance timelines. It also considers special rates and provisions for certain states. Ensuring a uniform tax rate for goods and services nationwide remains a primary responsibility of the GST Council.
How is the GST Council structured?
Here's a table outlining the structure of the GST Council according to Article 279 (1) of the Indian Constitution:
Designation |
Designation in GST Council |
Union Finance Minister |
Chairperson |
Union Minister of State - In charge of Revenue or Finance |
Member |
Minister in charge of finance or taxation or nominated Minister by each state government |
Members |
The GST Council serves as a joint forum for both the Central Government and State Governments to discuss and decide on matters related to Goods and Services Tax (GST) in India.
GST Council recommendations
The GST Council, as per Article 279A(4) of the Indian Constitution, is tasked with making recommendations to both the UTs and the states on crucial matters related to GST. These recommendations encompass determining which goods and services will be subject to or exempted from GST, establishing GST laws, and defining principles governing various aspects such as:
- Place of supply
- Threshold limits
- GST rates on goods and services
- Special rates for raising additional resources during natural calamities or disasters
- Special GST rates for certain states
Key features of the GST Council
- Establishment of the GST Council office in New Delhi
- Appointment of the Revenue Secretary as the Ex-officio Secretary to the GST Council
- Inclusion of the Central Board of Indirect Taxes and Customs (CBIC) Chairperson as a permanent invitee (non-voting) to all GST Council proceedings
- Creation of the post of Additional Secretary to the GST Council
- Establishment of four posts of commissioner in the GST Council Secretariat (equivalent to Joint Secretary level)
- Inclusion of officers from both Central and State Governments on deputation basis in the GST Council Secretariat.
Funding for the expenses (both recurring and non-recurring) of the GST Council Secretariat is provided by the cabinet, with the entire cost borne by the Central government.
Background of the Goods and Services Tax Council
The background of the Goods and Services Tax Council can be traced back to the 101st Amendment Act of 2016, which paved the way for the introduction of GST in India. This tax regime necessitated cooperation and coordination between the central and state governments for its smooth administration.
To facilitate this consultation process, the amendment introduced Article 279-A in the Constitution, empowering the President to constitute a GST Council through an order. Accordingly, the President issued the order in 2016 to establish the Council, with its Secretariat located in New Delhi. The Union Revenue Secretary serves as the ex-officio Secretary to the Council.
Role of the GST Council
The GST council is responsible for recommending tax rates, procedures, and other administrative matters related to GST. Some of the key responsibilities of the council include:
- Setting tax rates: One of the primary roles of the GST Council is to set the tax rates for different goods and services. The council is authorised to set multiple rates for items based on their nature, and the decision on rates needed to be in consensus.
- Addressing GST-related issues: The council addresses complaints, issues, and challenges related to GST implementation. The council is required to meet regularly to refine and improve the GST structure as needed.
- Approval of GST rules: The GST Council is responsible for approving the GST rules and regulations that govern the GST implementation in India. This includes procedures for registration, payment of taxes, GST return filing, and other related matters.
- Monitoring GST implementation: The GST Council continuously tracks the performance of GST implementation in India. The council monitors compliance with GST regulations, reviews tax collections, and takes corrective measures as needed.
Importance of the GST council
The GST Council plays a significant role in facilitating the implementation of GST in India. Its decisions have far-reaching effects on businesses in India. Some of the benefits of the GST council's decisions for business include:
- Predictability: The GST council's regular meetings, stable tax rates, and clear guidelines help businesses plan and budget more effectively, making it easier for them to conduct their operations.
- Ease of compliance: The GST council's decisions, including simplification of paperwork and other processes, have made it easier for businesses to comply with the GST regulations, saving them time and money.
- Transparency: The GST Council's decision-making process is transparent, ensuring that all stakeholders are aware of the rationale behind its decisions.
- Alignment with international standards: The GST council's decisions are in alignment with international standards, which can improve India's position in the global market.
Vision and Mission of the GST Council
The GST Council, in its operations, is guided by the objective of establishing a harmonized GST structure and fostering the development of a unified national market for goods and services. Additionally, the Council determines the procedural framework for carrying out its functions. Here's a breakdown of its vision and mission:
Vision:
To establish the highest standards of cooperative federation in the Council's operations, being the first constitutional federal body empowered to make all major decisions related to GST.
Mission:
To evolve, through extensive consultation, a GST structure that is driven by information technology and is user-friendly.
Composition of the Goods and Services Tax Council
The Council serves as a collaborative platform for both the central and state governments. It consists of the following members:
The Union Finance Minister as the Chairperson.
The Union Minister of State in charge of Revenue or Finance.
The Minister responsible for Finance, Taxation, or any other nominated Minister from each state government.
The members from the states must select a Vice-Chairperson from among themselves, and they can determine the term of the Vice-Chairperson.
The Chairperson of the Central Board of Excise and Customs (CBEC) is included as a permanent invitee (non-voting) to all Council proceedings as per the decision of the Union Cabinet.
Working of the GST Council
Decisions within the Council are made during its meetings. A quorum, constituting one-half of the total number of members, is required to conduct a meeting. Each decision of the Council must be supported by a majority of not less than three-fourths of the weighted votes of the members present and voting.
The voting system is based on the following principles:
- The central government's vote holds a weightage of one-third of the total votes cast.
- The combined votes of all state governments carry a weightage of two-thirds of the total votes cast.
No act or proceeding of the Council will be deemed invalid due to the following reasons:
- The presence of any vacancy or deficiency in the Council's constitution.
- Any flaw in the appointment of a person as a Council member.
- Any procedural irregularity of the Council that does not impact the merits of the case.
Functions of the Goods and Services Tax Council
The Council is tasked with making recommendations to both the central and state governments on various aspects of GST, including:
The consolidation of taxes, cesses, and surcharges levied by the central, state, and local bodies to be merged into GST.
Determining the goods and services to be subjected to or exempted from GST.
Formulating model GST laws, principles of levy, and apportionment of GST on inter-state transactions.
Establishing threshold turnover limits for GST exemptions.
Setting GST rates, including floor rates with bands.
Proposing special rates during natural calamities or disasters.
Addressing specific provisions for certain states.
Recommending the GST implementation date for specific petroleum products.
Recommending compensation to states for revenue loss due to GST implementation, for a five-year period.
Based on these recommendations, the Parliament determines the compensation to be provided to the states.
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