GST Council, Composition, Powers and Functions

Goods and Services Tax (GST) Council is a constitutional body in India responsible for making recommendations and decisions related to issues concerning the Goods and Services Tax. It was constituted under Article 279A of the Indian Constitution to ensure cooperative federalism in the administration of GST. The council plays a crucial role in formulating policies, deciding tax rates, and addressing various challenges related to GST implementation.

The GST Council stands as a symbol of cooperative federalism, bringing together the central and state governments to make collective decisions on GST-related matters. Its composition, powers, and functions are designed to ensure a collaborative approach to indirect taxation in India. As the GST system evolves, the Council will continue to play a pivotal role in addressing challenges, promoting uniformity, and contributing to the overall economic growth of the country.

Composition of GST Council:

The GST Council is a unique and collaborative platform involving both the central and state governments. The composition reflects the principles of federalism, with representation from both levels of government. The key members of the GST Council include:

1. Chairperson:

• The Union Finance Minister of India serves as the Chairperson of the GST Council.
• The Chairperson presides over the council meetings and plays a pivotal role in decision-making.

2. Members:

• The Union Minister of State in charge of Revenue or Finance is a member of the GST Council.
• The Finance Ministers from each state and union territory with a legislative assembly are also members.

3. Decision-Making:

All decisions of the GST Council are made by a three-fourths majority. This means that the central government, together with at least half of the states, need to agree on any decision.

4. Voting Mechanism:

• The central government holds one-third of the total votes, while all the states collectively hold two-thirds.
• Each state has an equal vote, regardless of its size or economic strength.

Powers of GST Council:

The GST Council is vested with significant powers to make decisions and recommendations pertaining to GST.

1. Recommendation of GST Rates:

The Council recommends the tax rates on goods and services, taking into account factors such as revenue implications, inflation, and the overall economic situation.

2. Special Rates and Exemptions:

The Council has the authority to recommend special rates or exemptions for specific goods and services, providing flexibility to address unique economic or social considerations.

3. Threshold Limit for Exemption:

The Council determines the threshold limit for exemption from GST, which affects the scope of businesses covered by the tax.

4. Division of GST Revenues:

The Council decides on the modalities for the division of GST revenues between the central and state governments. This ensures a fair and equitable distribution of resources.

5. Administration and Implementation:

The Council provides recommendations on measures to enhance the efficiency of GST administration and implementation.

6. Dispute Resolution:

In case of disputes between the central and state governments or among states, the Council plays a role in facilitating resolutions. It acts as a forum for consensus-building and conflict resolution.

7. Model GST Laws:

The Council recommends model GST laws for adoption by both the central and state governments. This promotes uniformity in the application of GST across the country.

8. Monitoring and Evaluation:

The Council monitors the implementation of GST and evaluates its impact on the economy. It has the power to recommend necessary changes and adjustments to improve the system.

Functions of GST Council:

The GST Council performs a range of functions to ensure the smooth functioning and effective implementation of GST. Some of the functions:

• Tax Rate Recommendations:

One of the primary functions of the GST Council is to recommend tax rates for goods and services. This includes determining the rates for different categories of goods and services.

• Threshold Limit Determination:

The Council sets the threshold limit for businesses to determine the turnover below which they are exempt from GST. This threshold influences the coverage of businesses under the tax regime.

• Exemptions and Special Rates:

The Council evaluates and recommends exemptions or special rates for specific goods and services based on economic and social considerations.

• Review of Revenue Trends:

The Council regularly reviews the revenue trends under GST to assess the impact on the central and state finances. This helps in making informed decisions on revenue-sharing arrangements.

• Harmonization of Laws:

To promote uniformity in the application of GST, the Council recommends model laws that can be adopted by both the central and state governments. This harmonization ensures a consistent legal framework.

• GST Compensation to States:

The Council oversees the mechanism for compensating states for any revenue loss arising from the implementation of GST. It ensures that states are adequately compensated during the transition period.

• Setting Up of Dispute Resolution Mechanism:

The Council plays a crucial role in establishing a dispute resolution mechanism to address conflicts between the central and state governments or among states. This helps in maintaining cooperative federalism.

• Monitoring Implementation:

The Council monitors the implementation of GST, including compliance by businesses and the overall impact on the economy. It has the authority to recommend corrective measures to address implementation challenges.

• Decision-Making on Important Issues:

The Council serves as a forum for decision-making on significant issues related to GST, such as changes in tax rates, amendments to laws, and the introduction of new policies.

• Consensus Building:

The Council facilitates consensus-building among the central and state governments, fostering a collaborative approach to decision-making. This is essential for the smooth functioning of the GST system.

Challenges and Future Considerations:

While the GST Council has been instrumental in addressing many challenges associated with the implementation of GST, there are ongoing considerations and challenges that need attention:

• Rate Rationalization:

The Council may need to continue reviewing and rationalizing tax rates to ensure simplicity and uniformity. Striking a balance between revenue generation and consumer affordability is crucial.

• Compliance and Technology Integration:

Enhancing compliance and integrating advanced technology tools for efficient tax administration is an ongoing challenge. This includes addressing issues related to the GST Network (GSTN) and ensuring smooth technology adoption by businesses.

• Inclusion of Real Estate and Petroleum:

The inclusion of real estate and petroleum products under the ambit of GST has been a subject of discussion. Decisions regarding their inclusion would have significant implications and may require careful consideration by the Council.

• Simplification of Returns Filing:

Further simplification of the returns filing process is an area that the Council may need to address. Streamlining compliance procedures can reduce the burden on businesses.

• Anti–Profiteering Measures:

The Council needs to continue monitoring anti-profiteering measures to ensure that businesses pass on the benefits of reduced tax rates to consumers.

• International Best Practices:

Exploring and adopting international best practices in indirect taxation can contribute to the continuous improvement of the GST system.