GST Council: Functions, Structure & GST Implementation

GST Council is a constitutional body. It monitors and coordinates all aspects of the Goods and Services Tax (GST), including tax inclusion, mergers, exemptions, and other implementation processes. The 101st Amendment Act of 2016 created the body, making recommendations to the federal and state governments about the GST.

The GST Council combines ideas and rules into a single document, notifying stakeholders of changes through circulars and notifications that are made public following meetings. In this article, we will look into the background, structure, features, functions, and implementation of the GST Council.

What is the GST Council?

The GST Council is a constitutional body concerned with advising the Union or State governments on matters related to the Goods and Services Tax. In India, the GST Council is a key decision-making body for the Goods and Services Tax. The GST Council’s mission is to maintain the highest standards of cooperative federalism in all aspects of the Council’s functioning. The first federal body established by the Constitution with the power to decide on all major GST matters is the GST Council.

Background of the GST Council

The Goods and Services Tax is a new tax system that was implemented in the nation by the 101st Amendment Act of 2016. Coordination and cooperation between the states and the federal government are necessary for the effective and seamless administration of the GST. The GST Council was to be formed as part of the reforms to facilitate the consolation process. The Indian President was given the authority to establish a GST Council by the insertion of Article 279-A into the Indian Constitution. Thus, the GST Council was established by the President in 2016. Its secretariat is presently located in New Delhi.

Structure of the GST Council

The states and the centre participate jointly in the GST council. The Union Finance Minister is the chairperson of the GST Council.

• The Union State Minister of Revenue or Finance and the Ministers managing Finance or Taxation in each State are among the other members of the GST Council.
• The members of the state councils are required to select one member to serve as the vice-chairperson of the GST Council. They also have the authority to choose their term.
• The 33 members of the GST Council are divided between two members from the central and 31 members from 28 states with legislation and three Union territories.
• The central board of excise and customs’ chairman is always invited to all meetings but does not have voting rights.

Principles and Objectives of the GST Council

The establishment of a unified national market for goods and services, along with a standardized GST structure, serves as the guiding principle of the GST Council. It also establishes the process by which it will perform its duties. The following are the goals and objectives of the Council:

• Being the first constitutional federal body with the authority to decide on all significant matters about GST, the Council aims to establish the highest standards of cooperative federation in its operations.
• Through broad input, the Council aims to develop a GST structure that is information technology-driven and user-friendly.

Features of GST Council

Features of the GST Council include the following:

• The Indian Revenue Secretary serves as the Ex-officio Secretary to the GST Council.
• All GST Council meetings are chaired by the Central Board of Excise and Customs (CBEC), which also serves as a permanent invitee with no vote.
• There would be a position created for the GST Council’s Additional Secretary. This position would be equivalent to that of the Indian government’s Additional Secretary.
• Four commissioner positions would be created in the GST Council Secretariat at the rank of Joint Secretary of the GST Council.
• Officers appointed from both the Central and State Governments on a deputation basis would make up the GST Council Secretariat.

Functions of the GST Council

According to Article 279 A (4), the GST council’s role is to advise the Union and the state governments on the following matters:

• The Goods and Services Tax is imposed by the Union, the States, and municipal governments through cesses, taxes, and surcharges.
• Any exceptional prices are offered for a limited time to raise extra funds in the event of a crisis or natural disaster.
• The products and services that could be subject to the Goods and Services Tax or excluded from it.
• The minimum turnover threshold below which products and services could be free from GST.
• Model legislation or guidelines related to GST, GST-exempt flooring.
• Special provisions for the states of Uttarakhand, Assam, Mizoram, Nagaland, Tripura, Manipur, Meghalaya, Himachal Pradesh, and Arunachal Pradesh.
• Also, the GST Council can suggest when gasoline, high-speed diesel, petroleum crude, aviation turbine fuel, and natural gas may be subject to the GST.
• In addition, the GST Council must suggest that the states be compensated for the five years that the implementation of the GST has caused them to lose revenue. Parliament made a decision regarding compensation based on the recommendation.

GST Meetings and Decision Making

Every decision made by the GST Council is subject to the following conditions:

• A majority of present members voting with at least three-fourths of their votes.
• The Central Government of India considers one-third of the total votes cast for making decisions.
• Also, the votes cast by the state governments must account for two thirds of the total votes voted.
• Any actions or procedures of the GST Council should not be deemed invalid for the reasons listed below:

1. Any gaps or deficiencies in the GST Council’s composition.
2. Any error in the selection of any GST Council member.
3. The GST Council’s procedural irregularities have no bearing on the case’s merits.

Impact of GST council on Indian Economy

The GST Council in India has had a multifaceted impact on the country’s economy and taxation system since its inception. Here are several key aspects of the impact of the GST Council on India:

• Simplified Tax Structure: The GST Council played a pivotal role in simplifying India’s tax structure by replacing a complex and fragmented system with a unified Goods and Services Tax (GST). This simplification has streamlined tax administration and compliance.
• Uniform Tax Rates: The GST Council is responsible for determining tax rates on goods and services. This has led to uniform tax rates across states, promoting consistency and reducing disparities in the tax structure.
• Creation of a Common Market: The harmonization of tax policies through the GST Council has facilitated the creation of a common market across India. Businesses can now operate more seamlessly across state borders, contributing to economic integration.
• Elimination of Cascading Effect: The GST Council’s decisions, including the provision of input tax credit, have significantly reduced the cascading effect of taxes. This has improved the overall efficiency of the tax system and reduced the tax burden on businesses.
• Enhanced Compliance: The GST Council’s focus on technology-driven solutions, such as the Goods and Services Tax Network (GSTN), has contributed to improved compliance. The digitization of tax processes has made it easier for businesses to adhere to GST regulations.
• Boost to Formalization of Economy: The GST Council’s initiatives have encouraged businesses to formalize their operations. The transparent and standardized nature of the GST system has incentivized businesses to enter the formal economy, reducing the prevalence of the informal sector.
• Ease of Doing Business: The introduction of the GST has positively impacted the ease of doing business in India. The simplification of tax procedures and the reduction of regulatory hurdles contribute to a more business-friendly environment.
• Cooperative Federalism: The GST Council exemplifies the spirit of cooperative federalism by bringing together representatives from the central and state governments. This collaborative approach helps in resolving differences and creating a unified tax framework.
• Reduction in Tax Evasion: The GST’s online reporting and real-time monitoring mechanisms have contributed to a reduction in tax evasion. The system allows for better tracking of transactions, making it more challenging for businesses to evade taxes.
• Consumer Benefits: The GST Council’s efforts to rationalize tax rates and ensure that businesses pass on the benefits of reduced tax rates to consumers have contributed to increased affordability and price stability.
• Adaptability to Economic Changes: The GST Council has demonstrated an ability to adapt to economic changes and challenges. It has made dynamic decisions, including rate revisions and relief measures, in response to evolving economic conditions.
• Effective Crisis Management: During times of economic crises, such as the COVID-19 pandemic, the GST Council has played a crucial role in implementing relief measures and addressing challenges faced by businesses and taxpayers.

Resolution of Disputes by the GST Council

The GST Council also has the responsibility of developing a system for resolving the following disagreements:

• Disagreements arise between a state’s state government and the federal government.
• Conflicts arising from disagreements between the Central Government and one or more States and one or more States on opposing sides.
• Disagreements between two or more States that resulted from the GST Council’s recommendations being implemented or from the council’s recommendations itself.

49th GST Council Meeting

Nirmala Sitharaman, the Union Finance Minister, and her state counterparts presided over the 49th GST Council. The GST Council made recommendations regarding modifications to the GST Compensation, GST Appellate Tribunal, Special Composition Scheme for Specific Commodities, GST Rates, GoM Report on Capacity-Based Taxation, and Additional Trade Facilitation Measures during its 49th meeting. Below are the highlights from the 49th GST Council meeting:

• The recommendations for creating GST Appellate Tribunals have been implemented, although with minor changes.
• There will be streamlined late fees under Section 47 for small taxpayers filing their GST Annual Return in Form GSTR 9 after the deadline starting in FY 2022–2023.
• The whole GST Compensation Cess of Rs 16,982 crore would be settled. The Center will release the funds that are in their possession and use future collections to make up the shortfall.
• Publicizing amnesty schemes that grant conditional waivers or discounts for past-due GST returns is necessary.
• A separate composition technique will be used in a number of businesses, including Paan masala, Gutkha, and tobacco.
• GST will be applied on an RCM basis to any commercial services that the Court provides.
• The time frame within which a request to withdraw or cancel registration may be submitted has been extended from 30 to 90 days.

The GST Council has fundamentally transformed India’s tax landscape, fostering economic integration, simplifying compliance, and promoting cooperative federalism. Despite challenges, its impact includes a unified tax system, reduced cascading effects, and a boost to formalization. The Council’s adaptability and crisis management underscore its pivotal role in India’s economic journey.

GST Council UPSC

The UPSC Syllabus’s Economics part includes a discussion about the GST Council. It is included in the larger categories of taxation, fiscal policy, and Indian economy. Regarding the nation’s fiscal and economic policies, aspirants studying for the UPSC exam should familiarize themselves with the duties and responsibilities of the GST Council. Students preparing for UPSC examination can refer to this article for comprehensive notes on GST council.

FAQs on GST Council

1. What is GST Council?

A constitutional body called the GST Council is responsible for offering recommendations on matters about the Goods and Services Tax (GST) implementation in India.

2. How many members are in GST Council?

The GST Council is comprised of 33 members. Of the thirty-three members, two are appointed by the federal government, while thirty-one are elected by the twenty-eight states and three union territories. The Goods and Services Tax Council was created in accordance with Article 279A (1) of the Constitution.

3. Who is the Full Form of GST ?

The Full Form of GST is Goods and Services Tax.

4. Which body is the GST Council?

Article 279A of the Indian Constitution establishes the GST Council as a constitutional body. The Constitution’s One Hundred and First Amendment is the Goods and Services Tax (GST).

5. Who is founder of GST?

The founder of GST is recognized as Atal Bihari Vajpayee.

6.How to Calculate GST?

1. GST Amount = (Original Cost*GST Rate Percentage) / 100.
2. Net Price = Original Cost + GST Amount.

7. Who is the Father of GST?

Atal Bihari Vajpayee is known as the father of GST.

8. Who is the first chairman of GST Council?

The first Chairman of the GST Council was Arun Jaitley. Arun Jaitley served as the Union Finance Minister of India.

9. Who is the present Chairman of GST Council?

Nirmala Sitharaman was the Finance Minister of India and, consequently, the Chairperson of the Goods and Services Tax (GST) Council.

10. When GST Laws implemented in India?

The Goods and Services Tax (GST) was implemented in India on July 1, 2017.