GST Council: Origin, Members, Power and Functions

PWOnlyIAS December 07, 2023 01:50 5870 0

Know about the origin, powers, and functions of the GST Council, shaping India's tax landscape. Understand its significance and the recent Supreme Court verdict on GST.

GST Council: Origin, Members, Power and Functions

Constitutional Mandate

The GST Council is a constitutional body under Article 279A of the Indian constitution.

Origin of the GST Council

Introduction: The Government of India brought the 101st Amendment Act of 2016 to introduce the Goods and Service Tax in the country.
Mandate: The GST council was formed for the smooth and efficient administration of the new tax regime under the GST system.
Formation: Under the amendment, the President of India issued an order to constitute the Council, which would act as a center of coordination between the centre and the states.

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Appointment of GST Council

Authority: The President of India issues orders to set up the council.
Composition:
- The Union Finance Minister will be the chairperson;
- The Union Minister of State in-charge of Revenue or Finance as a member;
- The Minister-in-charge of Finance or Taxation or any other Minister nominated by each state government as a member;
- The vice-chairperson will be from amongst the state representatives and will be rotated;
- The Chairperson of the Central Board of Excise and Customs (CBEC) as a permanent invitee (without voting);
- The Secretary of the Revenue Department will be the EX-Officio Secretary to the GST Council.

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Powers of GST Council

Quorum: For the GST council meeting to ahead, at least 50 per cent of the total number of members should be present at the meeting.
Decision-making: The decision-making will be based on a majority of not less than three-fourths of the weighted votes of the members present and voting at the meeting.
Voting Powers: The centre has one-third of the total votes, while the weightage of the states’ is two-thirds.

Functions of GST Council

Subsuming Indirect Taxes: The GST council will decide on subsuming various taxes, cess, and surcharges in GST.
Deciding items on the List: The GST council will decide on the services and goods that will be subjected to GST or which will be exempted from GST.
GST for Interstate Trade: The council will decide on modeling GST Laws, principles of levy, and apportionment of GST levied on supplies in the course of inter-state trade or commerce.
Resources to tide over Calamity: The council can decide special rates or rates for a specified period to raise additional resources during any natural calamity or disaster.
Exempted Threshold: The council decides on the threshold limit, with turnover below it to be exempted from GST.
GST Floor Rate: The council decides on GST rates including floor rate with bands of GST.
Special Provisions: The council looks at special provisions for states such as Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand.

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Significance of GST Council

Mutual Consensus: GST seeks to make decisions regarding GST with mutual consensus from all parties.
Uphold Federalism: The GST council is a step towards strengthening federalism principles in the country.
Handle new Issues: The GST council is tasked with deliberating on various issues entrusted to it, especially related to new challenges.
Handle Ground Level Challenges: The GST council is tasked with carrying out IT readiness, rigorous consultations, workshops, and training sessions for the industry and traders, and all other stakeholders involved.

Criticism against GST Council

Centre-oriented: No decision can be taken by the GST council without the support of the centre due to the votes held by them.
Recommendatory Powers: The GST council has the power to make only recommendations regarding GST implementations. This could lead to a constitutional crisis when a particular state may refuse to follow the decision of the majority.

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Supreme Court Verdict on GST Council

The Ruling: A recent decision of the Supreme Court ruled that the recommendations of the Goods and Services Tax (GST) Council are not binding on either the Union government or the states.
- In case the decisions are considered binding then it would disrupt fiscal federalism, where both the Union and the states have equal power to legislate on GST.
The Centre’s Argument: The centre had argued that in case the recommendations of the council were not binding, then the entire structure of GST would collapse as each state would then levy a conflicting tax and collection mechanism.

Goods and Service Tax (GST)

About: Goods and Service Tax (GST) is a tax regime that has replaced many indirect taxes in India such as the excise duty, VAT, services tax, etc.
Constitutional Amendment: GST came into effect following the 101st Amendment of the Constitution of India by the Indian government.
GST Timeline:

GST Council

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Features:
- GST is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.
- GST is a single domestic indirect tax law applicable to the entire country.
GST Slab: Currently, there are five GST slabs: 5%, 12%, 18% and 28%.
Components of GST:
- IGST: It is the tax collected by the central government on inter-state transactions.
- CGST: It is the tax collected by the Central Government on an intra-state transaction.
- SGST: It is the tax collected by the state government on an intra-state transaction.
Main Items outside GST: Fruits and vegetables, loose groceries, petroleum products, milk and its products alcoholic drinks, electricity, etc are currently outside the GST ambit.
Significance:
- Subsuming Multiple Taxes: GST has subsumed the majority of indirect taxes such as service tax, Value Added Tax (VAT), Central Excise, etc.
- Uniform Tax Structure: With the implementation of GST, every state in the country follows the same tax structure. This enables the introduction of common laws.
- Reduce Cascading Effects: The GST regime will remove the cascading effect of taxes. This removes the application of multiple taxes on the same product.
- Remove Tax Evasion: GST law has been made stringent to prevent tax evasion using fake invoices.
- Tax Base Growing: The GST has allowed the government to increase taxpayer base by including more businesses into the fold.
- Competitive Pricing: Previously, business was not uniform across the states due to different tax structures. Now, tax rates have become uniform.
Important Components of GST
- e-way Bills: It is a waybill that is generated by manufacturers, traders, and transporters for the goods transported from the place of its origin to its destination.
- e-invoicing: It is a system where business-to-business invoices are electronically uploaded and authenticated with a unique IRN.

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Conclusion:

The GST council is likely to play a more effective role in ensuring fiscal federalism in the country by giving voice to the states. In the interest of the nation, there must be a consensual decision on issues concerning GST.

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GST Council FAQs

The GST Council is a constitutional body under Article 279A of the Indian constitution.

The GST council was formed for the smooth and efficient administration of the new tax regime under the GST system.

The decision-making will be based on a majority of not less than three-fourths of the weighted votes of the members present and voting at the meeting.

A recent decision of the Supreme Court ruled that the recommendations of the Goods and Services Tax (GST) Council are not binding on either the Union government or the states.

Goods and Service Tax (GST) is a tax regime that has replaced many indirect taxes in India such as the excise duty, VAT, services tax, etc. It is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.

The Government of India brought the 101st Amendment Act of 2016 to introduce the Goods and Service Tax in the country.

GST has subsumed the majority of indirect taxes such as service tax, Value Added Tax (VAT), Central Excise, etc.

Currently, there are five GST slabs: 5%, 12%, 18% and 28%.

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GST Council: Origin, Members, Power and Functions

Constitutional Mandate

Origin of the GST Council

Appointment of GST Council

Powers of GST Council

Functions of GST Council

Significance of GST Council

Criticism against GST Council

Supreme Court Verdict on GST Council

Goods and Service Tax (GST)

Conclusion:

GST Council FAQs

What is the GST Council?

What are the main functions of the GST Council?

How is the decision made in the GST Council?

Is the decision of the GST council binding on the centre and state governments?

What is GST?

GST was introduced under which amendment of the constitution?

What are some of the taxes subsumed by GST?

What are the different tax slabs under GST?

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