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.
What are the key recommendations of the GST Council?
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.
| Recommendation area | What it covers |
|---|
| GST rate | Recommends GST rate slabs of 0%, 5%, 12%, 18% and 28% for different goods and services. |
| Goods and services exempted from GST | Decides which goods and services should be exempted from GST based on economic and social priorities. |
| Threshold limits | Recommends turnover thresholds below which businesses are exempt from GST registration. |
| Special GST rates | Recommends special GST rates for natural calamities, disasters or specific states, where required. |
| GST laws | Recommends GST laws, place of supply rules and apportionment principles for inter-state transactions. |
These recommendations help maintain consistency in GST administration while enabling the Central and State Governments to implement a harmonised indirect tax framework across India.
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 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.
Role of the GST Council in tax rate decisions
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.
| Stage | Who is involved | Outcome |
|---|
| Proposal | Any member of the GST Council may submit a proposal as part of the functions of GST Council. | The proposed GST rate change is placed before the Council for consideration. |
| Deliberation | All 33 members discuss the proposal during a formal GST Council meeting. | The proposal is reviewed based on revenue impact, industry requirements and public interest. |
| Voting | The GST Council votes using a three-fourths weighted majority (Centre: one-third voting weight; States together: two-thirds voting weight). | The recommendation is approved or rejected. |
| Implementation | The Central Government and State Governments issue the necessary notifications or legislative changes. | The revised GST rate comes into effect after the required legal process. |
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.
How does GST Council decide on GST rate in India?
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.
| Decision criterion | Rule |
|---|
| Quorum | A minimum of 50% of the total 33 members must be present for a valid meeting. |
| Voting threshold | A proposal is approved only if it receives a three-fourths weighted majority of the votes cast. |
| Central Government voting weight | The Central Government carries one-third of the total voting weight. |
| State Governments' voting weight | All State Governments together carry two-thirds of the total voting weight. |
| Meeting frequency | The GST Council meets as required, typically multiple times each year, to consider GST-related matters. |
This structured decision-making process helps ensure that changes to GST rates are based on consensus between the Centre and the States before implementation.
Difference between the GST Council and the GSTN
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.
| Parameter | GST Council | GSTN | Key distinction |
|---|
| Nature | Constitutional body under Article 279A | Non-profit company incorporated under Section 8 of the Companies Act | Policy-making body vs IT infrastructure company |
| Function | Recommends GST rates, exemptions and GST laws | Provides technical infrastructure for GST registration, return filing and other online services | Policy decisions vs technology implementation |
| Established by | Constituted by the President of India in 2016 | Incorporated as a private company in 2013 | Constitutional establishment vs corporate incorporation |
| Members/Shareholders | 33 members representing the Centre and States/Union Territories | Government and institutional shareholders | Government representatives vs organisational shareholders |
| Output | GST rate recommendations, exemptions and policy decisions | GST portal, e-invoicing system and e-way bill platform | Regulatory framework vs digital service delivery |
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.
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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