GST Council

Recently, the 53rd Goods and Services Tax (GST) Council met in Delhi under the Chairpersonship of the Union Minister for Finance and Corporate Affairs.

Key Highlights From 53rd GST Council Meeting

• The  GST council recommended taxes on items such as milk cans and solar cookers and announced some relief for students living in certain kinds of rented accommodation.
• The Council reduced the GST on cartons from 18% to 12% to provide relief to apple farmers in Himachal Pradesh and Jammu and Kashmir.

Goods and Services Tax (GST)

Goods And Services Tax (GST) is a comprehensive, multi-stage, destination-based single domestic tax on the consumption of goods and services in the country effective from July 1, 2017.

• Introduction: It was introduced by the Constitution (101st Amendment) Act, 2016 to establish a uniform tax rate across the country.
• Integration of Taxes: It replaced several indirect taxes such as excise duty, VAT, service tax, and luxury tax on goods and services, leaving out a few items like excise duty on alcohol, property tax and stamp duty, petroleum crude, diesel, petrol, aviation turbine fuel, natural gas, electricity duty, and basic customs duty.
• Legislative Power: Under Article 246A(1), it empowered the Parliament and each State Legislature to make laws regarding goods and services tax imposed by the Union or the respective State.
  • For inter-State trade or commerce (Article 246A(2)), the Parliament holds exclusive authority.

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GST Council

• About: It is a constitutional body formed under Article 279A(1), enacted by the 101st Constitutional Amendment Act.
• Recommendations: According to Article 279A(4), the GST Council recommends the GST rates for the Union and the States.
• Composition of GST Council (Article 279A(2)): The GST Council brings together representatives from the Centre and the States to oversee the nationwide implementation of GST. Its membership includes:
  • Chairperson: Union Finance Minister
  • Member: Union Minister of State in charge of Revenue or finance
  • Members nominated by each State Government, typically in charge of finance or taxation
  • Vice-Chairperson elected from among the Council members (Article 279A(3))
  • The GST Council Office is located in New Delhi, with the Revenue Secretary serving as the Ex-officio Secretary to the GST Council.
• Decision Making Process: The GST rates are jointly determined by the states and the central government during GST Council meetings.
  • The GST Council requires at least half of its total members to be present to conduct a meeting. Decisions are made based on a majority of no less than three-fourths of the weighted votes of members present and voting. 
  • The central government’s vote carries a weight of one-third of the total votes cast, while all states collectively hold the remaining two-thirds weightage.

Supreme Court (SC) judgment on GST framework

• Non-Binding: The recommendations of the GST Council are advisory and not legally binding. Article 279A does not explicitly state that all decisions of the GST Council are mandatory for the parties involved.
• Legislative Authority: Article 246A grants authority to both the Parliament and State legislatures to legislate on GST. 
  • Therefore, GST Council decisions are not mandatory, and the Centre or State can reject these decisions to set different rates for goods and services within their jurisdiction.

Importance of GST Council

• Standardising Tax Rates: The GST Council has been instrumental in establishing uniform tax rates and processes, leading to a four-slab tax structure (5%, 12%, 18%, and 28%) across India. 
  • Some goods fall under the ‘Exempt Goods category’, while others attract a cess above the 28% rate. 
    • The cess collected contributes to the GST Compensation Fund, enabling the Union Government to make bi-monthly compensatory payments to states.
• Economic Federalism: GST promotes economic federalism by facilitating collective decision-making between the Centre and states, relinquishing their individual rights to set tax rates on most goods and services.
  • To date, all decisions of the GST Council, except for the uniform GST on state-operated and authorized lotteries (considered a sin good), have been made through consensus.
• Ease of  doing Business: The GST Council aims for a unified GST structure and a cohesive national market, simplifying compliance with seamless tax credits and eliminating tax cascading, thereby promoting unrestricted movement of goods across India.
• Competitive Federalism: Enhanced interstate trade stimulates competition among states to attract more investments.

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