Goods and Services Tax Council (Article 279A)

At a Glance

• What it is The joint forum of the Centre and states that guides the goods and services tax
• Article Article 279A, inserted by the 101st Amendment Act, 2016
• Chair The Union Finance Minister
• Decisions Three-fourths of weighted votes of members present and voting
• Exam link UPSC Prelims, Polity: Funds with Government of India

Where Does It Fit?

This is the last topic of the category on Funds with the Government of India. The smooth administration of GST requires co-operation and co-ordination between the Centre and the states. The GST Council was created to provide the consultation process.

Establishment and Composition

The 101st Amendment Act of 2016 inserted Article 279A, empowering the President to constitute a GST Council by an order, which the President did on 15 September 2016. The Council is a joint forum of the Centre and the states. Its Secretariat is in New Delhi, and the Union Revenue Secretary is its ex-officio Secretary. Its members are: the Union Finance Minister as Chairperson; the Union Minister of State in charge of Revenue or Finance; and the Minister in charge of Finance or Taxation or any other minister nominated by each state government. The members from the states choose one among themselves as the Vice-Chairperson and decide the term. The Chairperson of the Central Board of Indirect Taxes and Customs is a permanent non-voting invitee.

Working and Voting

No act or proceeding of the Council is invalid merely because of a vacancy or defect in its constitution, a defect in the appointment of a member, or a procedural irregularity not affecting the merits. The Council is to be guided by the need for a harmonised GST structure and a harmonised national market for goods and services. It has been described as the first constitutional federal body vested with powers to take all major decisions relating to GST.

Functions

The Council recommends to the Centre and states on: the taxes, cesses and surcharges of the Centre, states and local bodies to be merged in GST; the goods and services to be subjected to or exempted from GST; model GST laws, principles of levy, apportionment of inter-state GST and the place of supply; the threshold turnover for exemption; the rates, including floor rates with bands; any special rate for a specified period to raise resources during natural calamity or disaster; special provisions for Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, Uttarakhand and Jammu and Kashmir; and any other matter relating to GST.

Why the Council Was Needed

Before the 101st Amendment, the Centre levied taxes such as excise duty and service tax while the states levied sales tax, entry tax and entertainment tax, and these overlapping levies had a cascading effect. GST subsumed these separate levies so as to remove the cascading effect and provide a common national market. But since both the Centre and the states now have concurrent power to make GST laws, they needed a single forum so that rates and rules would not diverge. Article 279A provides that forum. The Council is guided by the need for a harmonised structure of GST and a harmonised national market. Its vision is the highest standard of cooperative federation, and its mission is a GST structure that is information-technology driven and user friendly.

Other Functions

The Council recommends the date on which GST may be levied on petroleum crude, high speed diesel, petrol, natural gas and aviation turbine fuel. It has to establish a mechanism to adjudicate disputes between the Centre and one or more states, between the Centre and some states on one side and other states on the other, or between two or more states. It recommends the compensation to the states for loss of revenue due to the introduction of GST for five years, and on that basis Parliament enacted the Goods and Services Tax (Compensation to States) Act, 2017.

Article 279A thus makes tax policy a matter of joint decision. The weighted voting rule means that no single side can decide alone: the Centre has a veto since its one-third weight is more than the one-fourth needed to block, while the states together also hold a veto through their two-thirds weight.

Why Is This Topic Important?

• Recent amendment The 101st Amendment is current-affairs linked
• Voting weights One-third and two-thirds is a standard question
• Cooperative federalism Key example

What Came Next?

The next category covers systems of government, beginning with the parliamentary form at the Union and state levels.

Key People and Terms

• Weighted vote Votes weighted one-third Centre, two-thirds states
• Ex-officio Secretary Union Revenue Secretary
• Quorum One-half of members
• CBIC Central Board of Indirect Taxes and Customs
• Compensation For revenue loss to states for five years

Exam Corner

Mains Angle

Questions on this topic usually ask about cooperative federalism. Use these points to add depth.

• Cooperative federalism Joint forum decides rates and rules
• Voting design Neither side can decide alone
• Dispute settlement Council to set up a mechanism
• Compensation Five-year assurance to states