Goods and Services Tax (GST) Council: Meaning, Structure, and Importance

The GST Council performs the key functions of GST Council by recommending GST rate slabs, goods and services exempted from GST, and GST laws to the Central and State Governments under Article 279A(4) of the Constitution of India, ensuring uniform implementation of the Goods and Services Tax across the country.

These recommendations help maintain consistency in GST administration while enabling the Central and State Governments to implement a harmonised indirect tax framework across India.

• 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.

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.

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 GST Council consists of 33 members drawn from the Central Government and all State and eligible Union Territory governments, making it the apex body for recommending GST policies in India. The Council is chaired by the Union Finance Minister and includes the Union Minister of State in charge of Revenue or Finance. It also comprises the Minister responsible for Finance, Taxation, or another nominated minister from each state government. In addition, the Chairperson of the Central Board of Indirect Taxes and Customs (CBIC) attends Council meetings as a permanent non-voting invitee.

Who represents state governments in the GST Council?

Each state government is represented by the Minister responsible for Finance, Taxation, or another minister nominated by the state government. The state representatives elect a Vice-Chairperson from among themselves for a mutually decided term. Union Territories with legislatures, such as Delhi and Puducherry, are represented in the GST Council in a similar manner.

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.

The role of the GST Council is to recommend changes to GST rates in India, making it the apex constitutional body responsible for tax rate decisions. The GST Council recommends revisions to GST slabs, including the highest GST rate of 28%, through a voting process that requires a three-fourths weighted majority. The Central Government has one-third of the total voting weight, while all State Governments together hold the remaining two-thirds. Once approved, the recommendations are implemented by the Central and State Governments through the required legislative or statutory notifications.

GST rate revisions can directly affect business costs, pricing and working capital requirements, making it important for businesses to plan their finances and funding needs accordingly, including through suitable business financing solutions such as a Bajaj Finance Business Loan.

The GST Council decides GST rate changes in India through a formal meeting that requires a quorum of at least 50% of its 33 members and approval by a three-fourths weighted majority of the votes cast. As part of the functions of GST Council, members review proposals relating to the GST rate slabs of 5%, 12%, 18% and 28%, discuss their revenue and economic impact, and vote before making recommendations to the Central and State Governments.

This structured decision-making process helps ensure that changes to GST rates are based on consensus between the Centre and the States before implementation.

The GST Council is a constitutional policy-making body established under Article 279A of the Constitution of India, while the GSTN (Goods and Services Tax Network) is a non-profit IT infrastructure company that develops and manages the GST portal and related digital services. The GST Council frames GST policy and recommends tax rates, whereas the GSTN provides the technology platform for GST registration, return filing, e-invoicing and e-way bills.

While the GST Council determines the policy direction of India's GST regime, the GSTN enables taxpayers to comply with those policies through a secure digital platform.

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.

Here are a few other articles related to GST

The GST Council powers cover four key areas: recommending tax rates, deciding exemptions, determining GST laws and principles, and addressing special provisions for states. The GST Council derives its authority from Article 279A, introduced through the 101st Constitutional Amendment.

The Goods and Services Tax Council generally takes decisions by a three-fourths majority of the weighted votes of members present and voting, with the Centre having one-third and all states together having two-thirds of the voting weight. These GST council responsibilities can directly affect businesses through changes in rates, exemptions, and compliance requirements.

The GST Council directly influences the impact of GST on essential commodities by setting rate slabs of 0%, 5%, 12%, 18%, and 28%, which can affect the final retail price paid by consumers.

Essential commodities may therefore attract lower or nil GST, while higher slabs apply to selected goods. For example, unbranded food items can attract 0% GST, whereas branded food items may attract 5%, and specified luxury goods can attract 28%.

When the goods and services tax council revises a rate, the change can flow through manufacturers, distributors, retailers, and ultimately to consumers through the supply chain.