GST COUNCIL COMPOSITION, FUNCTIONING

The GST Council is a key institution established by the 101st Constitutional Amendment Act, 2016, to oversee and make decisions regarding the Goods and Services Tax (GST) in India. Its role is crucial in shaping GST policies, ensuring effective implementation, and addressing issues related to GST.

Composition of the GST Council

The GST Council is composed of:

1. Union Finance Minister:
   • Role: The Union Finance Minister is the chairperson of the GST Council.
   • Example: Nirmala Sitharaman, as the Finance Minister, heads the GST Council and presides over meetings and discussions.
2. State Finance Ministers:
   • Role: Each state finance minister is a member of the GST Council. They represent their respective states’ interests and concerns.
   • Example: The Finance Minister of Maharashtra, the Finance Minister of Tamil Nadu, etc., participate in the council, providing input from their states.
3. Minister of State for Finance:
   • Role: A Minister of State for Finance assists the Union Finance Minister and is also a member of the GST Council.
   • Example: The Minister of State for Finance supports the chairperson and participates in council discussions.
4. Secretaries of Finance and Revenue Departments:
   • Role: Senior officials from the central and state finance and revenue departments assist the council in technical and administrative matters.
   • Example: The Secretary of the Department of Revenue, Government of India, provides technical inputs and support.

Functioning of the GST Council

1. Making Recommendations:
   • Function: The GST Council makes recommendations on various aspects of GST, including tax rates, exemptions, and procedural issues.
   • Example: The council recommends GST rates for different goods and services, such as the 5% GST rate on essential items or 18% on standard goods.
2. Assessing and Addressing Issues:
   • Function: The council reviews and resolves issues related to GST implementation, such as disputes between states and the central government or practical challenges faced by businesses.
   • Example: The council might address issues related to input tax credit or transitional provisions in GST implementation.
3. Setting Policy and Framework:
   • Function: The council sets the policy framework for GST, including the structure of GST laws and rules, and ensures uniformity across states.
   • Example: It decides on the harmonization of GST laws across states to prevent inconsistencies and ensure smooth tax administration.
4. Reviewing and Amending GST Laws:
   • Function: The council reviews GST laws and suggests amendments to address any deficiencies or to incorporate new economic realities.
   • Example: If the council identifies that certain sectors are facing undue hardship due to GST regulations, it may propose amendments to alleviate such issues.
5. Deciding on Compensation:
   • Function: The council decides on the compensation mechanism for states that experience revenue losses due to the implementation of GST.
   • Example: If a state’s revenue from indirect taxes falls short post-GST implementation, the council ensures that compensation is provided based on the revenue loss calculations.
6. Advisory Role:
   • Function: The council provides advisory support on GST matters to both central and state governments.
   • Example: It advises on the best practices for GST compliance and administration.

Examples of GST Council Decisions

1. Rate Adjustments:
   • Example: In 2018, the GST Council reduced the GST rate on sanitary napkins from 12% to 0%, aiming to make menstrual hygiene products more affordable.
2. Exemptions:
   • Example: The council has provided exemptions for certain items like unbranded food items, which are taxed at a lower rate or are exempt from GST to support the lower-income population.
3. Input Tax Credit:
   • Example: The GST Council has issued guidelines to streamline the process of claiming input tax credit, ensuring that businesses can offset the tax paid on inputs against their output tax liability efficiently.
4. Compensation to States:
   • Example: The GST Council implemented a compensation scheme to ensure states that experienced revenue shortfalls due to GST implementation received financial assistance.

Summary

1. Composition:

• Union Finance Minister: Chairperson.
• State Finance Ministers: Members representing their states.
• Minister of State for Finance: Member.
• Secretaries of Finance and Revenue Departments: Provide technical support.

2. Functioning:

• Making Recommendations: On GST rates, exemptions, etc.
• Assessing and Addressing Issues: Resolving GST implementation challenges.
• Setting Policy and Framework: Establishing GST laws and rules.
• Reviewing and Amending Laws: Updating GST regulations as needed.
• Deciding on Compensation: Providing financial assistance to states.
• Advisory Role: Supporting central and state governments on GST matters.

Examples:

• Rate Adjustments: Reduction of GST on sanitary napkins.
• Exemptions: GST exemptions on unbranded food items.
• Input Tax Credit: Streamlined guidelines for claiming credit.
• Compensation: Financial support to states for revenue losses.

The GST Council plays a pivotal role in shaping and implementing the GST framework in India, ensuring a balanced and effective taxation system that accommodates both central and state interests.