India’s tax system was once a fragmented and complex structure, often characterised by overlapping levies that varied from state to state. However, in 2017, with the introduction of GST, a new chapter began in the taxation history of India. This new tax regime promised a seamless and unified taxation structure for the whole country.
But who ensures this ambitious tax regime stays fair, flexible, and future-ready? It’s the Goods and Services Tax Council.
In this article, we’ll explore what the GST Council, its role in reforming the Indian taxation process, and how a GST Council meeting works.
What is GST Council?
The GST Council is a constitutional body that manages all aspects of the GST framework in India, including decisions on tax rates, administration, and other related matters. The GST Council article, Article 279-A of the Indian constitution, formally established the body to oversee the implementation and administration of GST.
The GST Council is required to meet periodically, where all the major decisions are taken. These GST Council meetings aim to create a user-friendly GST structure through extensive consultation and ensure that the structure is directed by information technology.
What is the Structure of the GST Council?
The GST Council members form a joint platform representing both the Central and State Governments. It includes the following members:
- The Union Finance Minister is the Council’s Chairperson.
- The Union Minister of State who is in charge of Revenue or Finance.
- The Minister handling finance and taxation, or any other Minister nominated from each state government.
- A Vice-chairperson, selected by the members of the state.
- The Chairperson of the Central Board of Excise and Customs (CBEC), appointed as a permanent invitee.
What are the Responsibilities of the GST Council?
The primary function of the GST Council meeting is to make recommendations to the central and state governments on diverse aspects of GST. Some of their key responsibilities include:
- Consolidating taxes, cesses, and surcharges levied by different authorities to streamline tax administration.
- Determining which goods and services are subject to or exempted from GST, thus supporting economic development.
- Formulating model GST laws, principles of levy, and rules for the apportionment of GST on inter-state transactions.
- Recommending special tax rates during natural calamities or disasters.
- Establishing threshold turnover limits to simplify business compliance for small enterprises.
Based on these recommendations of the GST Council meeting, the Parliament determines the compensation mechanism for the states.
Why is the GST Council Important?
The GST Council has transformed India’s tax landscape, making the system more efficient and business-friendly. Some of the benefits of the GST Council meeting’s decisions are mentioned here.
- Simplified tax structure: The Council has simplified the indirect tax regime, facilitating ease of doing business.
- Transparency and global alignment: The increased transparency has enhanced the credibility of the tax system and ensured alignment with the global standards.
- Increased predictability: New tax reforms have enabled predictability that allows businesses to plan their finances and establish confidence.
All these reforms introduced by the Council have brought much-needed stability to the Indian economy.
What are the Challenges faced by the GST Council?
The challenges faced by the GST Council affect decision-making prospects, revenue collection, and the efficiency of GST implementation. Here are some significant challenges faced by the GST Council:
- Aligning national and state-level interest: The major challenge for the GST Council is balancing the interests of the central and state governments. With GST replacing multiple taxes, states have differing views on tax rates, exemptions, and revenue-sharing, making alignment difficult.
- Maintaining consistency across state: The purpose of GST was to create one tax system. However, there are still differences between states based on their infrastructure levels, administrative efficiency, and digital readiness, which creates inefficiencies in tax collection.
- Tackling revenue shortfall: Several states have noticed decreased financial revenue since GST was implemented, as they no longer manage their tax systems and rely on central distributions. The GST compensation mechanism was introduced to prevent financial losses, but delays in payments and the economic impact of COVID-19 have further strained state finances.
- Adjusting to economic change: India’s dynamic economy, particularly in sectors like E-commerce and fintech, requires regular updates to GST policies. Economic volatility, inflation, and structural complexities make fixing the tax rates and compliance process hard.
Final thoughts
The GST Council plays a major role in reforming India’s tax framework by fostering cooperation between the Centre and the states. Despite some challenges, its efforts continue to enhance transparency, simplify compliance, and ultimately drive economic growth.
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FAQs
The title “Father of GST in India” is often given to Dr. Vijay Kelkar, whose work laid the foundation for GST. However, it was the former Prime Minister Atal Bihari Vajpayee who presented the thought in 2000.
Sikkim is the only tax-free state in India, which grants full income exemptions to its residents under Article 371(F) and the Income Tax Act 1961.
India introduced the maximum GST rate slab of 28%. It is considered the highest rate among more than 140 countries that have implemented GST.
Tata Consultancy Services (TCS) currently holds the title of the highest tax-paying company in India. TCS paid 6.8% of its total revenue in taxes in the last fiscal year.
14 May 2025
5 mins read
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