Goods and Services Tax Council (GST Council)

Let’s begin with a simple question:
“Who decides how GST is designed, what rates are applied, and how both Centre and States cooperate in implementing it?”

The answer is — the GST Council — a federal decision-making body that ensures smooth coordination between the Centre and the States in India’s new indirect tax regime.

⚖️ Constitutional Basis & Establishment

• The 101st Constitutional Amendment Act, 2016 introduced Goods and Services Tax (GST) — a unified indirect tax that replaced multiple central and state taxes like VAT, excise, and service tax.
• To ensure cooperative federalism in the management of this new system, a new Article 279A was added to the Constitution.
• Article 279A empowers the President of India to constitute a Goods and Services Tax Council (GST Council) by order.

Accordingly, the President constituted the GST Council in 2016.

The Secretariat of the Council is located in New Delhi, and the Union Revenue Secretary acts as its ex-officio Secretary.

🎯 Vision and Mission

The GST Council is guided by the idea that “India should have one nation, one tax, one market.”

Vision

To establish the highest standards of cooperative federation, being the first constitutional federal body empowered to take major decisions related to GST.

Mission

To evolve, through wide consultation, a technology-driven, transparent, and user-friendly GST structure that simplifies taxation for citizens and businesses.

In essence, it represents the spirit of fiscal teamwork between the Centre and States.

👥 Composition of the GST Council

The Council is a joint forum of the Centre and the States, consisting of:

1. Union Finance Minister → Chairperson of the Council
2. Union Minister of State (Finance/Revenue) → Member
3. Finance Minister / Taxation Minister of each State → Member

🔹 The members from the States elect one among themselves as the Vice-Chairperson, and they can also decide his/her tenure.

🔹 The Chairperson of the Central Board of Indirect Taxes and Customs (CBIC) is a permanent invitee to the meetings — but without voting rights.

⚙️ Working and Decision-Making

The GST Council’s functioning reflects the cooperative federal spirit of the Indian Constitution.

Quorum

• At least one-half of the total members must be present for the meeting to be valid.

Decision-Making Formula

Every decision of the Council must be supported by at least three-fourths of the weighted votes of members present and voting.
The weightage is distributed as follows:

1. Central Government’s vote → 1/3rd weight
2. All State Governments combined → 2/3rd weight

Thus, neither the Centre nor the States can dominate; both must agree for any decision to pass — a true symbol of cooperative federalism.

Validity of Proceedings

Decisions of the Council remain valid even if:

• There’s any vacancy or defect in its constitution, or
• Any member’s appointment is later found defective, or
• There’s any minor procedural irregularity not affecting the decision’s substance.

🧩 Functions of the GST Council

The Council makes recommendations to both the Centre and the States on key aspects of GST policy.
Let’s understand it clearly:

1. Taxes to be subsumed under GST –
   Which central, state, or local taxes, cesses, and surcharges will merge into the GST framework.
2. Taxable Goods and Services –
   Which goods/services will be covered under GST and which will be exempted.
3. Model GST Laws and Principles of Levy –
   Framing a model GST law and deciding the principles for levy and apportionment of GST in inter-state trade (like the IGST mechanism).
4. Threshold Exemption Limit –
   Determining the turnover limit below which businesses are exempted from GST registration.
5. GST Rates –
   Deciding rates and rate bands — i.e., slabs like 0%, 5%, 12%, 18%, and 28%.
6. Special Rates for Emergencies –
   Permitting temporary additional rates for special situations like natural disasters or calamities (to raise extra resources).
7. Special Provisions for Certain States –
   Recommending special concessions for Northeastern States, Hill States, and Jammu & Kashmir (before its reorganization).
8. Any Other Matter –
   Any issue related to GST that the Council may decide to take up.

🧠 Other Key Functions

Beyond recommending tax rates and structures, the GST Council also performs other vital functions:

1. Taxation of Petroleum Products

It recommends the date when GST may be levied on
petroleum crude, high-speed diesel, petrol, natural gas, and aviation turbine fuel (ATF).

(Currently, these items are outside GST, but the Council can decide to bring them in later.)

2. Dispute Resolution Mechanism

The Council is empowered to establish a mechanism to resolve 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.

This ensures that GST-related disagreements are handled within the constitutional framework itself.

3. Compensation to States

The Council recommends how to compensate States for loss of revenue due to the implementation of GST for a five-year transition period.

Based on this recommendation, the Parliament enacted the GST (Compensation to States) Act, 2017.

Under this law, States were assured compensation for revenue loss at a 14% annual growth rate over their 2015–16 tax base.

🌐 Significance of the GST Council

1. Institutionalises Cooperative Federalism –
   The Council brings together the Centre and all States on a single decision-making platform.
2. Uniformity in Taxation –
   Ensures harmonized tax structure across India → avoids multiple, conflicting tax regimes.
3. Flexibility with Consensus –
   Decisions are taken through broad consensus, not compulsion — maintaining balance between autonomy and unity.
4. Dynamic Federal Mechanism –
   It acts as a living institution — continuously adapting GST rules, exemptions, and rates based on economic needs.
5. First Federal Decision-Making Body –
   For the first time in India’s history, both the Centre and States are constitutionally bound to work together on fiscal policy.

🧠 In Simple Words

The GST Council is like India’s fiscal Parliament —
where the Centre and States sit together as equals to decide how GST should work.
It reflects the true spirit of cooperative federalism,
balancing national uniformity with state-specific needs.

The GST Council ensures that tax decisions are collective, transparent, and consensus-driven —
a model of how federalism in India can function both efficiently and harmoniously.