GST Council – Indian Polity Notes
101st Constitutional Amendment Act 2016 was passed to introduce new indirect tax regime, which subsumed many indirect taxes imposed by states and centre, reducing the cascading effect of these taxes on the end consumer. It provides slabs of tax rates, which will be collected and then shared among States and the Union based on formula agreed by the GST Council.
Background:
Idea of common Goods & Services Tax was first mooted by Kelkar Committee in year 2004. The Committee had recommended common national goods and services tax. During Budget Speech in April 2008, the then Finance Minister proposed the target date for implementation for such common national tax as April 1, 2010.
The Empowered Committee of State Finance Ministers (EC) which had played significant roles in designing state value added tax (VAT) was asked to prepare plan for GST.
Joint Working Groups of officials having representatives of the States as well as the Centre were set up to examine various aspects of the GST and draw up reports specifically on exemptions and thresholds, taxation of services and taxation of inter-State supplies.
Based on discussions within and between it and the Central Government, the EC released its First Discussion Paper (FDP) on GST in November, 2009.
Due disagreement over forgoing taxation powers by States was a cause of concern and how the tax collected at common tax poo be shared among both centre and state was not clear. It took a lot time and efforts to arrive at consensus wherein state agreed to let go their taxation powers over some subjects were compensated by Centre. Finally concentrated efforts of states and union government led to passing of 101st Amendment Act in 2016 which Introduced nation wide good and services tax
Composition:
As per Article 279A(2) The GST Council consists of following:
- Union Finance Minister – Chairperson of the Council
- Union Minister of State for Finance/Revenue.
- Finance Minister/Revenue Minister or any other minister nominated by the State Government.
Union Finance Minister is the chairperson and vice-chairman is chosen among the members of council. The term of Vice Chairman is decided by the council.
Working:
The decisions of the council are made by a three-fourths majority. The Central Government holds one-third vote weightage and a two-thirds vote is with the state, each state has one vote.
Revenue secretary is appointed as the ex officio secretary of the council.
The chairman of the Central Board of Excise & Customer (CBEC) would be appointed as a permanent invitee without voting rights.
An additional secretary post at the GST secretary council would be created. Four posts of commissioners at the GST secretary council would be created.
Mandate:
Under Article 279A(4), the GST council has the power to give recommendations on:
The Goods and Services Tax Council shall make recommendations to
- The taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the goods and services tax;
- The goods and services that may be subjected to, or exempted from, the goods and services tax;
- Model Goods and Services Tax Laws, principles of levy, apportionment of Goods and Services Tax levied on supplies in the course of inter-State trade or commerce under article 269A and the principles that govern the place of supply;
- The threshold limit of turnover below which goods and services may be exempted from goods and services tax;
- The rates including floor rates with bands of goods and services tax ;
- Any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster;
- Special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and
- Any other matter relating to the goods and services tax, as the Council may decide.
Criticism:
- The GST Council has advisory powers, the recommendations of the councils are binding though are arrived upon by consensus.
- Trust Deficit between states and Centre.
- Many key areas of economy are still out purview of GST and council has not attained consensus to include them under GST until them these subjects like petroleum will have cascading effect of taxation.
Conclusion:
Biggest achievement of the Good and Services Tax and Council is uniformity in indirect tax rates, though they are categorised into slabs but progressively there’ll be single tax rate in India with reference to indirect taxation. The Council through its consensus based decision making has upheld the spirit of cooperative federalism.
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