The GST (Goods, Services, and Tax) Council is a responsible body for shaping the GST framework of India. It ensures smooth implementation, and uniformity, and facilitates coordination between the central and state governments across the country. In this article, we will provide you with the structure of the GST Council, its members, meetings, and the various functions it performs.
Introduction to the GST Council
The introduction of The Goods and Services Tax (GST) simplified the taxation system by replacing multiple indirect taxes such as VAT, excise duty, and service tax. For the successful implementation and continuity of GST, a governing body was necessary. This is where the GST Council came into play. GST Council was established under Article 279A and the 101st Constitutional Amendment Act which came into effect in 2016.
The Council plays an important role in decision-making about tax rates, exemptions, and other aspects of the GST system through notifications and circulars, in consultation with the finance ministry and other departments.
Why was the GST Council Created?
Multiple taxes like VAT, sales tax, and service tax were levied before the introduction of the unified tax system GST. Those taxes usually led to confusion and inefficiencies. Thus, the GST council was created to:
- Harmonize the tax structure across India.
- Ensure the uniform application of GST rates and regulations.
- Address the concerns of both the central and state governments.
- Make decisions on exemptions, tax rates, and the overall GST system.
GST Council discusses GST-related matters and provides a platform for discussion and consensus between the central and state governments.
Structure of the GST Council
Article 279A of the Constitution of India defines the structures of the GST Council. The GST Council is made up of:
Chairperson
The Union Finance Minister
The Union Finance Minister is the chairperson of the GST Council. They hold the highest authority in decision-making.
Members
Union Minister of State for Finance and State Finance Ministers
- Union Minister of State for Finance: Assists the finance minister in managing the GST framework.
- State Finance Ministers or their Representatives: Represent the interests of their respective states and contribute to discussions.
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GST Council: Structure, Members, Meetings and Functions
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Permanent Invitee: CBIC Chairperson
Ensures that discussions remain aligned with the operational aspects of the GST but do not have voting rights.
Ex-Officio Secretary: The Revenue Secretary
Oversees and coordinates the day-to-day administrative functions of the GST Council.
Features of GST Council in Brief
The GST Council, being an implementing body of the Goods and Services Tax (GST) system in India, carries the following features:
Headquarters in New Delhi: The main office of the GST Council is located in New Delhi, India where all its activities and meetings are held.
Revenue Secretary as Secretary: The Revenue Secretary of India is the head of the GST Council’s office. They are in charge of the day-to-day operations and decisions.
Permanent Invitee (CBIC): The Central Board of Indirect Taxes and Customs (CBIC) is invited to every GST Council meeting, but they don’t have the right to vote on decisions.
Specialized Team: The GST Council has experts and experienced officials, such as commissioners and additional secretaries, who help manage and advise on GST-related matters.
Funding: The central government takes care of the expenses of the GST Council’s office. It includes the costs for meetings and other activities.
Management by Central and State Officials: The GST Council is managed by officials from the central government and state governments.
Functions and Roles of the GST Council
The roles and responsibilities of the GST Council are extensive and as follows:
Setting Tax Rates: Decide the tax rates for various goods and services
Resolving Issues: Addresses any issues or challenges related to GST implementation
Approving GST Rules: Approves the rules for GST registration, tax payments, and filing GST returns.
Revenue Distribution: Manages how the revenue from GST is shared between the central government and the states.
Tax Exemptions: Decides which goods and services are exempt from GST.
GST Thresholds: Sets the turnover limits for businesses to qualify for GST exemptions.
Providing relief during natural disasters: Recommend special tax rates or measures at times of crisis.
State-Specific Provisions: Creates special provisions for certain states based on their economic needs.
Benefits of GST Council
The GST Council holds extreme importance for the smooth functioning of the Goods and Services Tax (GST) system in India. Following are some of the benefits of the GST Council:
Predictability: The GST Council provides stable and clear tax rates. With this predictability, businesses can plan their operations and activities related to finance easily, making long-term decisions.
Ease of Compliance: The GST Council, with the introduction of tools like e-invoicing, dynamic QR codes, and the integration of e-way bills, has made it easier to comply with tax laws. This way tax filing is faster and less complex with a reduced burden of paperwork and the chances of mistakes.
Transparency: The public can access the decision-making process of the Council. This helps build trust in the system by making the process fairer.
International Alignment: The GST Council makes sure that India’s tax system is in alignment with international standards. This alignment makes it easier for Indian companies to trade with other countries, reduce barriers, and be more competitive in the global market.
Fostering Cooperative Federalism: The GST Council fosters cooperation between the central and state governments. This way, the tax system works smoothly for all regions of the country, reducing conflicts between the different levels of government.
Encouraging Fairness: The GST Council helps prevent tax evasion and fraud. It ensures that businesses comply with tax laws and that no one takes unfair advantage.
Rate Rationalization: The GST Council by rationalizing tax rates reduces the financial burden on goods and services, making them more affordable.
Boosting Economic Growth: With a uniform tax law, it creates a more business-friendly environment.
How Does the GST Council Work?
The GST Council conducts regular meetings and discusses various aspects of the GST system.
Decision-Making Process
The decisions of the GST Council are made through a voting system. Voting on decisions follows this principle:
- Central Government: One-third of the total votes.
- State Governments: Two-thirds of the total votes.
A decision gets passed when at least three-fourths of the votes of the members present are in favor. This creates a balance between the different levels of government while also maintaining fairness and accountability.
Meetings of the GST Council
The GST Council meetings take place at the GST Council office in New Delhi. The GST Council has held 54 meetings so far.
The 54th meeting was the latest gathering that focused on the following topics:
- Adjusting GST rates for specific goods and services.
- Enhancing compliance through easier rules.
- Implementing strategies to minimize tax conflicts and legal disputes.
- Tackling issues concerning Input Tax Credit (ITC) and tax refunds.
Key Outcomes from the 53rd GST Council Meeting
Several significant resolutions were reached in the recent meeting, including:
Assistance for Apple Farmers: The GST on cartons utilized by Apple farmers in Himachal Pradesh, Jammu, and Kashmir was lowered from 18% to 12%.
Railway Services: The GST Council granted an exemption from GST on services such as platform tickets, waiting rooms, and cloakroom facilities at railway stations.
GST on Various Products: The GST Council advocated for a 12% GST on items such as milk cans and solar cookers.
Trade Facilitation: A suggestion was made to waive penalties on GST demand notices issued during the initial three-year implementation period, provided there is no fraud or misrepresentation involved.
Biometric-based GST Verification: The Council endorsed a nationwide biometric Aadhaar-based verification system for GST to combat fraudulent claims.
Fertilizers: The GST Council urged for a reduction in GST on fertilizers to enhance affordability.
Uniform GST Rate for Machinery: A standardized 5% GST will now apply to imported parts, components, and equipment for aircraft, which is anticipated to benefit the Maintenance, Repair, and Overhaul (MRO) sector.
The Supreme Court’s Ruling on the GST Council
May 19, 2022:
The bench headed by Justice Dhananjaya Y. Chandrachud clarified that the GST Council’s advice is just that advice, not a command.
The Supreme Court of India has recently addressed the function of the GST Council, which offers guidance to the government regarding Goods and Services Tax (GST) policy. The court determined that the recommendations or decisions made by the GST Council are advisory, indicating that the central and state governments are not obligated to adhere to them. They have the liberty to choose whether to adopt these suggestions according to their requirements.
In simpler terms, although the GST Council provides direction to the government on GST issues, the governments (both central and state) are under no obligation to follow its recommendations if they choose not to. This allows them the discretion to make their own choices.
To Wrap Up
The GST Council is an important body in India’s tax system. It brings the central and state governments together providing a platform for cooperative decision-making. The efforts of the GST Council help improve the business environment and make it easier to conduct business and grow economically.
The role of the GST Council in prescribing appropriate rates, formulating laws, addressing specific state issues, and furthering economic stability are significant in the continuation of the smooth operation of GST.
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Frequently Asked Questions
Why was the GST Council created?
The GST Council was created to harmonize the tax structure across India and address the inefficiencies caused by multiple taxes. It also aims to ensure uniformity in the application of GST laws and provide a platform for discussions between central and state governments. The Council’s role is essential in shaping tax policies.
How are decisions made in the GST Council?
Decisions in the GST Council are made through a voting system. The central government has one-third of the total votes, and state governments have two-thirds. A decision is passed if at least three-fourths of the votes present are in favour.
Where is the headquarters of the GST Council located?
The headquarters of the GST Council is in New Delhi, India. This is where most of its meetings and activities take place. The central location helps in coordinating with both central and state governments.
What decisions were made in the 54th GST Council meeting?
The 54th meeting of the GST Council focused on adjusting GST rates for specific goods. It also discussed enhancing compliance measures and minimizing tax-related conflicts. The meeting included decisions to address Input Tax Credit issues and improve GST refunds.
Can the GST Council’s decisions be challenged?
Yes, the decisions of the GST Council can be reviewed or challenged. While the Council provides recommendations, its decisions are advisory, as clarified by the Supreme Court. The central and state governments are not legally bound to follow all the Council’s suggestions.
What is the importance of GST rate rationalization?
GST rate rationalization is important for making goods and services more affordable. The GST Council periodically reviews and adjusts tax rates to reduce the financial burden on consumers. This helps in creating a balanced tax structure.
How does the GST Council help in fostering cooperative federalism?
The GST Council promotes cooperation between the central and state governments, ensuring uniform tax laws across the country. Addressing the concerns of both central and state governments ensures balanced taxation. This helps in reducing conflicts between different levels of government.
Read our blog: GST Return Filing Procedure – Types of GST Returns, Due Date and Penalty
