What is the Goods and Services Tax (GST) Council?
- Established under the Constitutional (122nd Amendment) Act, 2016.
- Came into existence on September 8, 2016, after the President’s assent.
- A constitutional body that decides GST-related matters and provides recommendations to the Union and State governments.
Objectives of GST Council
- Ensure smooth implementation and regulation of GST in India.
- Harmonize tax laws across states, simplify the tax structure, and reduce compliance costs.
- Monitor taxation processes and prevent fraudulent activities.
Constitutional Provisions on GST Council
- Article 279A(1): The President must constitute the GST Council within 60 days of the commencement of Article 279A.
- Article 279A(2): Composition of the GST Council:
- Chairperson: Union Finance Minister.
- Members: Union Minister of State for Finance/Revenue and State Finance/Tax Ministers.
- Vice-Chairperson: Chosen from among the members.
- Article 279A(4): Functions of the GST Council:
- Recommend taxes, cesses, and surcharges to be subsumed under GST.
- Identify goods/services to be taxed or exempted.
- Define GST laws, levy principles, inter-state tax apportionment.
- Determine turnover threshold for GST exemption.
- Set GST rates, including special rates during natural disasters.
- Address special provisions for northeastern and hill states.
- Article 279A(5): Recommend GST applicability on petroleum, diesel, petrol, natural gas, and aviation turbine fuel.
- Article 279A(8): Determine procedures for functioning.
- Article 279A(11): Establish a mechanism to resolve disputes between the Centre and States.
Functioning of GST Council
- Article 279A(7): Quorum for meetings requires half of the total members.
- Article 279A(9): Decision-making based on a weighted voting system:
- Central Government: One-third weightage.
- State Governments collectively: Two-thirds weightage.
Recent Developments:
- Reconstitution of GoM on GST Revenue Analysis:
- In its 55th meeting on December 21, 2024, the GST Council reconstituted the Group of Ministers (GoM) on GST revenue analysis.
- The original GoM was first set up in 2019.
- The new GoM is headed by Goa Chief Minister Pramod Sawant.
Terms of Reference (ToR) of the GoM:
- Revenue Trend Analysis:
- Study state-wise revenue collection trends.
- Identify revenue patterns across different sectors and regions.
- Sector-Specific Revenue Issues:
- Review sector-wise revenue details and identify policy interventions or enforcement measures.
- Impact Analysis:
- Assess the effect of macroeconomic policy changes and geographical factors on GST revenues.
- Examine challenges faced by agrarian and smaller states.
- Analyze the impact of amendments in GST Acts and Rules.
- Unified Enforcement Platform:
- Review and recommend the harmonization of anti-evasion, audit, and scrutiny tools developed by agencies like NIC, GSTN, DGARM, and state governments.
- Propose a unified enforcement and compliance platform to curb tax evasion.
- Revenue Augmentation Measures:
- Suggest course correction policies for increasing revenue, particularly for states with high revenue shortfall.
Other Key GST Council Initiatives:
- GST Rate Rationalization:
- Another GoM, led by Bihar Deputy CM Samrat Chaudhary, is working on rationalizing GST rates and tax slabs.
- Compensation Cess Review:
- A separate GoM under MoS Finance Pankaj Chaudhary is assessing the compensation cess system.
- A new taxation proposal is being explored as the cess is set to expire on March 31, 2026.
GST Collection Trends:
- Fiscal Year 2024-25 (April-February):
- Gross GST collections grew by 9.4% to approximately Rs 20.13 lakh crore.
- After refunds, net GST collections rose by 8.6% to Rs 17.79 lakh crore.
The GST Council continues to play a critical role in refining India’s indirect tax structure. The reconstitution of the GoM on revenue analysis aims to strengthen revenue collection strategies, curb tax evasion, and improve compliance. Future GST policy changes will be instrumental in shaping economic growth and state revenues.
