- The President of India has given his assent to the Constitution (One Hundred and First Amendment) Act, 2016 enabling the implementation of a country-wide Goods and Services Tax (GST).
- As per Article 279A (1) of the amended Constitution, the GST Council has to be constituted by the President within 60 days of the commencement of Article 279A.
- The Union Cabinet under the Chairmanship of PM Modi has now approved the setting up of the GST Council and its Secretariat. The details are:
- Creation of the GST Council as per Article 279A of the amended Constitution. ( Hence, the Council is a Constitutional body).
- Creation of the GST Council Secretariat, with its office at New Delhi.
- Appointment of the Secretary (Revenue) as the Ex-offcio Secretary to the GST Council.
- Inclusion of the Chairperson, Central Board of Excise and Customs (CBEC), as a permanent invitee (non-voting) to all proceedings of the GST Council.
- Create one post of Additional Secretary to the GST Council in the GST Council Secretariat (at the level of Additional Secretary to the Government of India), and four posts of Commissioner in the GST Council Secretariat (at the level of Joint Secretary to the Government of India).
- The Cabinet also decided to provide for adequate funds for meeting the recurring and non-recurring expenses of the GST Council Secretariat, the entire cost for which shall be borne by the Central Government.
- The GST Council Secretariat shall be manned by officers taken on deputation from both the Central and State Governments.
- With this, the Empowered Committee of State Finance Ministers on the GST could cease to be the forum at which the discussions between the Centre and States would take place, as all the discussions and decisions should ideally take place in the Council.
Composition of the Council
- Each State is to nominate as a voting member a minister, who may or may not be holding the finance or the taxation portfolios.
- The Central Government will have two representatives on the Council
- The Union Finance Minister will chair it.
- The Union Minister of State in-charge of Revenue, will be a member.
- The Council will have a total of 33 members ( 29 state ministers, two representatives from two union Territories, and two Union ministers).
- The Centre will have one-third vote, states together will have a two-third say. To adopt a resolution, three-fourth majority would be required.
Responsibilities of the GST Council
- It will finalize the tax base by recommending the goods and services to be exempted, the threshold for taxation, the revenue-neutral rate (RNR) and the rate structure. These are far reaching issues which will impact the economic interest of all the States and the Centre.
- It will also have to finalize the number of slabs the GST will be pegged at for different categories of goods and services. Besides the standard rate, there could be a lower rate for wage goods consumed by the poor and another one for demerit or luxury goods, also called ‘sin goods’.
- Parliament has to make a law to provide for compensation for revenue losses to state governments, based on the recommendations of the Council.
- The Council will finalize the model Central, State and Integrated GST laws for their recommendation to and enactment by the Parliament and State Legislatures.
- Article 269A mandates the Council to make recommendations on three issues. These are:
- Special rates to deal with natural disasters.
- Special provisions for the North-Eastern States.
- The date on which petroleum products will be subjected to GST.
- The Council has legislative, executive and judicial powers. It will recommend GST legislation, oversee implementation of the GST in the country, and set up a mechanism to adjudicate disputes between its members.
What lies Ahead?
- The states and the Centre have to draft the Central GST, State GST, and integrated GST laws.
- These laws have to be passed by the Parliament and respective state legislatures.
- The CGST and IGST will be drafted on the basis of the model GST law.
- The states will draft their respective State GST (SGST) laws with minor variations incorporating state-based exemptions.
- The IGST law would deal with inter-state movement of goods and services.