GST Council : Benefits, Structure, Function & Working process

The Goods and Services Tax (GST) Council, established by the Government of India, plays a crucial role in modifying, regulating, and reconciling the GST system in the country. Let's delve into the meaning, benefits, features, and functioning of the GST Council.

GST Council Meaning:

The GST Council is a significant body to streamline India's goods and services tax structure. It supersedes the previous complex tax system and introduces new methods to simplify taxation for taxpayers. Additionally, it oversees the entire taxation process to assist relevant departments and prevent fraudulent activities.

Benefits of GST Council:

• Eliminates multiple taxation processes, streamlining the tax system.
• Introduces new taxation methods for ease of use.
• Enhances monitoring to prevent fraudulent practices.
• Ensures a smoother taxation process for all stakeholders.

GST Council Structure

The GST Council comprises vital members such as the Union Finance Minister as the Chairman, the Union Minister of State (who is in charge of Revenue or Finance), and nominated ministers from each State Government. The Council also includes an Ex-officio Secretary and a permanent invitee from the Central Board of Excise and Customs.

Powers of GST Council

The GST Council, empowered by the Constitution, possesses significant authority to shape and regulate India's GST regime. Its powers extend across various key areas:

1. Tax Rates and Exemptions: The Council can recommend GST rates for different goods and services, including exemptions or reductions where necessary.
2. Threshold Limits: It determines the turnover thresholds at which businesses must register for GST, ensuring uniformity and clarity in registration requirements.
3. GST Laws and Principles: The Council formulates and revises GST laws, guiding the application of tax principles, levy mechanisms, and compliance requirements.
4. Decision Making: With representation from the central and state governments, the Council collectively makes decisions on critical GST matters, fostering consensus and cooperation among stakeholders.

Through these powers, the GST Council shapes the trajectory of India's GST system, balancing the needs of businesses, consumers, and the economy at large.

How GST Council Works:

The GST Council holds the authority to recommend various aspects of GST, including tax rates, exemptions, turnover thresholds, and GST laws. It convenes periodic meetings to discuss and decide on crucial GST implementation and regulation matters. The Council's decisions aim to ensure uniformity in tax rates across the nation and address the specific needs of different states.

The GST Council, a crucial body in India's tax landscape, undertakes various functions to streamline and regulate the goods and services tax (GST) system. Here's a breakdown of its essential functions:

1. Recommendations on Taxation Matters: One of the primary functions of the GST Council is to make recommendations on all aspects related to GST taxation. This includes suggesting the inclusion or exclusion of goods and services under the GST ambit, determining tax rates, and proposing exemptions or cesses.
2. Threshold Limits: The Council decides the threshold limits for GST applicability, delineating the turnover levels at which businesses must register for GST. These thresholds change based on factors such as the type of business and the state of operation.
3. GST Laws and Principles: The Council formulates and revises GST laws, ensuring clarity and consistency in tax legislation. Additionally, it establishes principles governing the levy of GST, the apportionment of Integrated GST (IGST), and the determination of the place of supply for goods and services.
4. Special Provisions for States: Recognizing the diverse needs of different states, the GST Council devises special provisions for states facing unique challenges or circumstances. This includes requirements for north eastern states, Himachal Pradesh, Jammu and Kashmir, and Uttarakhand, aimed at facilitating smoother implementation of GST in these regions.
5. Other Associated Matters: Beyond taxation, the Council addresses related matters relevant to GST implementation and regulation. This encompasses compliance mechanisms, anti-profiteering measures, and measures to prevent tax evasion and fraud.

Background of the Goods and Services Tax Council

The introduction of GST in India was initiated by the onset of the 101st Amendment Act of 2016. This new tax regime meant full-fledged cooperation and coordination between the central and state governments for its smooth administration.

To facilitate this consultation process of the GST, the government introduced Article 279-A in the Constitution This new article gave the President the power to create a GST Council. In 2016, the President used this power to form the Council, which is based in New Delhi. The Union Revenue Secretary serves as the ex-officio Secretary to the Council.

Mission of the GST Council

To create a user-friendly GST structure through extensive consultation and ensure that the structure is driven by information technology.

Composition of the Goods and Services Tax Council

The GST Council is a joint platform for both the Central as well as the State Government and it includes the following members:

• The Union Finance Minister, who is the Council’s Chairperson
• The Union Minister of State in charge of Revenue or Finance
• The Minister handling finance, taxation, or any other nominated Minister from each state government
• The members of the state are expected to select a Vice-chairperson and decide on his/her term.
• As per the Union Cabinet’s decision, the Chairperson of the Central Board of Excise and Customs (CBEC) is appointed as a permanent invitee for all the proceedings that take place within the Council
   

Functions of the Goods and Services Tax Council

The prime function of the Council is to make recommendations to both the central and state governments on different aspects of GST: 

• To consolidate taxes, cesses, and surcharges levied by the central, state, and local bodies to be merged into GST.
• To decide the goods and services that need to be subjected to or exempted from GST.
• To Formulate model GST laws, principles of levy, and apportionment of GST on inter-state transactions.
• To establish threshold turnover limits for GST exemptions.
• To set GST rates, including floor rates with bands.
• To propose special rates during natural calamities or disasters.
• To address certain state-specific provisions.
• To recommend the GST implementation date for specific petroleum products.
• To recommend compensation to states for revenue loss due to GST implementation, for five years. Based on these recommendations, the Parliament determines the compensation for the states.

Features of the GST Council

• The GST Council set up its headquarters in New Delhi, establishing itself as a unified command center for GST implementation.
• The Revenue Secretary was appointed as the Ex-officio Secretary to the GST Council.
• The Central Board of Indirect Taxes and Customs (CBIC) Chairperson was granted permanent observer status, ensuring the Central Government's perspective was consistently considered.
• Four high-ranking positions (equivalent to Joint Secretaries) were created within the GST Council Secretariat to provide specialized expertise in various GST-related areas.
• The establishment of an Additional Secretary position further strengthened the Council's leadership and capacity.
• Officers from both Central and State Governments were seconded to the GST Council Secretariat, fostering collaboration and knowledge sharing.

Why is the GST Council so important?

The GST Council has played an important role in streamlining India's tax system. The decisions that it has made have significantly benefited businesses across the country.
Some of the key advantages include:

• Predictability: Consistent tax rates and clear guidelines help businesses plan and budget more effectively.
• Simplified Compliance: A streamlined processes reduces the administrative burden on businesses.
• Transparency: Open decision-making nurtures trust and ensures businesses understand the rationale behind tax policies.
• Global Alignment: GST's alignment with international standards improves India's competitiveness.

Conclusion

The GST Council serves as a pivotal decision-making body in India's taxation landscape, striving to streamline and regulate the GST system to benefit taxpayers and the economy. Its proactive approach to addressing taxation challenges reflects the government's commitment to fostering a transparent and efficient tax regime.

FAQs:

Q1. What are the primary functions of the GST Council?

The primary functions of the GST Council include making recommendations on tax rates, exemptions, turnover thresholds, and GST laws. It also addresses special provisions for certain states and advises on GST implementation and regulation matters.

Q2. How often does the GST Council convene for meetings?

The GST Council meets regularly to discuss and decide on important matters related to GST. While the Constitution does not specify the exact frequency of meetings, the Council typically meets at least four times a year, depending on the needs and requirements.

Q3. Who heads the GST Council meetings?

The GST Council meetings are chaired by the Union Finance Minister (acting as the Chairman of the Council). Additionally, the Finance Ministers of the states and Union Territories, along with other senior officers from the Ministry of Finance and the states and Union Territories, attend the meetings.

Q4. What is the significance of the quorum in GST Council meetings?

The quorum in GST Council meetings refers to the minimum number of members required for the meeting to be valid. Per the Constitution, one-third of the total GST Council members constitute the quorum. This guarantees that decisions are reached with sufficient representation from all members of the Council.

Q5. How does the GST Council contribute to India's economic growth?

The GST Council plays an important role in shaping India's economic landscape by streamlining the taxation system, fostering transparency, and promoting compliance. Its decisions on tax rates, exemptions, and regulations aim to create a good environment for business growth, investment, and economic development.