The Goods and Services Tax Council was formed in the year 2017. It is one of India’s most recognizable constitutional bodies that caters to the administration and execution of the GST system in the country. It was formed to establish cooperative federalism and a uniform tax system nationwide by Article 279A of the Constitution of India.
In simple words, GST is an all-inclusive indirect tax applied to every good and service supplied in India. It took the place of several cascading taxes imposed by the federal and state governments, including VAT, service tax, and excise duty. GST was put into effect on July 1, 2017, with the goals of streamlining the tax code, removing state-to-state tax obstacles, and establishing a single market nationwide.
Let us look at the detailed functioning of the GST Council in the below-mentioned sections.
Formulates Suggestions on GST Rates
The GST Council has a vital role to play in determining and approving GST rates for various commodities and services. These include the following:
- Recommendation of standard tariff by outlining the GST rates for the majority of products and services subject to the GST regime.
- Placing out one or more rates to particular categories of goods or services, taking into account factors like luxury, need, or public interest items.
- Determining which products and services should be free from GST or charged at a zero percent rate, including essential services.
- Simplify tax administration to lessen the burden of compliance, and maintain revenue neutrality.
Legislative Guidance
The GST Council has the authority to suggest legislative matters to the central and state governments on GST laws and directives. This consists of the following:
- The council can propose amendments to the Central Goods and Services Tax Act to improve compliance, streamline processes, and solve operational concerns.
- It can also create and endorse model GST laws and regulations that can act as a roadmap for States to ensure that the GST is applied consistently throughout the nation.
Conflict Resolution
Disagreements may arise between the Centre and the State. This is where the conflict resolution mechanism of the GST Council comes into effect in resolving these conflicts. This includes:
- The GST Council has established effective dispute resolution committees to handle and settle disagreements resulting from the application of GST legislation, rates, or revenue distribution.
- The GST panel consists of specialists or members of the GST Council who work to mediate and resolve conflicts in a fair and impartial way.
Administration and Implementation
The GST Council is responsible for monitoring and tracking the administration, as well as executing of GST throughout the nation to enable seamless operation. This consists of the following:
- The council examines the GST implementation to guarantee consistency and conformity on how the GST laws, regulations, and rates are being applied.
- The council also handles administrative issues that taxpayers and tax administrators confront, such as invoice matching, tax evasion, and more, thus ensuring a smooth functioning of the GST system.
Compensation Apparatus
The GST Council has also set up a compensation apparatus to safeguard State income during the initial phase of the GST implementation. This involves:
- The Council makes sure there is prompt payment of compensation to States for any loss of revenue arising from the implementation of the Goods and Services Tax.
- The council created Financial Agreements and Funding Mechanisms to choose the right ways to raise money for the compensation mechanism.
Other Functions
The GST Council can acquire additional powers or responsibilities in addition to those listed above if required by law or when new demands arise. This can include:
- Formulating policies that will improvise the tax collection procedures, streamline compliance requirements, and spur economic expansion.
- Evaluating the GST implementation and obtaining input from relevant authorities periodically to make any required changes.
- Collaborating with peers or international organizations to establish best practices and guarantee compliance with international taxation norms.
The Constitutional Foundation of The GST Council
The constitutional body of the GST Council has certain inherent provisions for supervising and directing the national rollout of the Goods and Services Tax (GST). The two major provisions include:
- Article 279A gives authority to the President of India to propose recommendations on the GST, including rates, exemptions, and other pertinent topics.
- The Council is made up of representatives from the Central Government and the State Governments, thus guaranteeing a cooperative governance strategy in which decisions are made together to unify the indirect tax system.
Composition of The GST Council
The GST Council has prominent members from both the center and the States. The position of the chairperson is presided over by the Union Finance Minister of the country. However, in their absence, one of the States’ Finance Ministers (chosen by other attendees) fulfills the responsibilities.
Other prominent members of the Council include the Union Minister of State responsible for Revenue or Finance, Minister in charge of Finance or Taxation from each State Government, and other ministers nominated by the respective State Governments to be part of the council.
It is evident from the above details that the GST Council is an integrated federalism between the Center and The State that secures tax decisions in the country. The council not only determines standard and special GST rates but also promotes a fair taxation structure in an attempt to balance the social and fiscal goals of an economy.
The significance of the functions of the GST Council cannot be overstated. Over the years, it has proved to be an essential pillar of India’s tax reform policies.
