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:

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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.