GST COUNCIL

[Mr. M. GOVINDARAJAN]

Section 12 of the Constitution (One hundred and first Amendment) Act, 2016 proposes to insert a new Article 279A after Article 279 which deals with Goods and Service Tax Council.  Section 12 came into force with effect from 12.09.2016, vide Notification No. S.O. No. 2915(E), dated 10.09.2016. 

Constitution of GST council

Article 279A (1) provides that the President shall, within 60 days from the date of the commencement of the Act, by order, constitute a Council to be called the Goods and Services Tax Council. Article 279A(2) provides that the GST council shall consist of the following members-

• Union Finance Minister – Chairperson;
• The Union Minister of State in charge of Revenue or Finance- Member;
• The Minister in charge of Finance or Taxation or any other Minister nominated by each State Government – Members.

The members shall, as soon as may be, choose one amongst themselves to be the Vice Chairperson of the Council for such period as they may decide.

The Cabinet approved creation of GST council and it’s Secretariat.  The Cabinet inter alia took decisions for the following:

• Creation of the GST Council as per Article 279A of the amended Constitution;
• Creation of the GST Council Secretariat, with its office at New Delhi;
• Appointment of the Secretary (Revenue) as the Ex-officio 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.

Vide Notification No.SO 2957(E), dated 15.09.2016 the President of India constituted the GST Council containing the above members in the council.

The GST Council is headed by Union Finance Minister Arun Jaitley and includes representatives of all the 29 states and 2 union territories.

Functions of GST Council

Article 279A (4) provides that GST council shall make recommendations to the Union and the States on-

• the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be submitted in the goods and services tax;
• the goods and services that may be subject to, or exempted from the goods and services tax;
• model Goods and Services Tax Laws, principal of levy, apportionment of Goods and Services Tax levied on applies in the course of inter-State trade or commerce under Article 269A and the principles that govern the place of supply;
• the threshold limit of turnover below which goods and services may be exempted from the goods and services tax;
• the rates including floor rates with bands of goods and services tax;
• special provisions with respect to the States of Arunachal Pradesh, Assam, J&K, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and
• any other matter relating to the goods and services tax, as the Council may decide.

Article 279A (5) provides that the Council shall recommend the date on which the GST be levied on petroleum crude, high speed diesel, motor spirit, natural gas and aviation turbine fuel.

While discharging the functions, the Council shall be guided by the need for a harmonized structure of GST and for the development of a harmonized market for goods and services.  The Council shall determine the procedure in the performance of its functions.

Proceedings of Council

Every decision of the Council shall be taken at a meeting by a majority of not less than three fourths of the weighted votes of the members present and voting in accordance with the following principles-

• the vote of the Central Government shall have a weightage of one third of the total votes cast; and
• the votes of all the State Governments taken together shall have a weightage of two thirds of the total votes cast in that meeting.

50% of the total number of Members of the Council shall constitute the quorum of the meeting.

No act or proceedings of the Council shall be invalid merely by reason of-

• any vacancy in, or in any defect in, the constitution of the Council; or
• any defect in the appointment of a person as a Member of the Council; or
• any procedural irregularity of the Council not affecting the merits of the case.

Adjudication of dispute

The Council shall establish a mechanism to adjudicate any dispute-

• between the Government of India and one or more States; or
• between the Government of India and any State or States on one side and one or more other States on the other side; or
• between two or more States

arising out the recommendations of the Council or implementation thereof.

First GST council meeting

At the meeting, held on 22.09.2016 and 23.09.2016, draft rules regarding GST were circulated and threshold for exemption and compensation norm discussed.  A consensus on compounding or composition scheme was arrived at the GST Council meeting.  The composition scheme provides for an easier method of calculating tax liability and it allows option for GST registration for dealers with turnover below the compounding cut-off.

Second GST Council meeting

Cracks surfaced in the second meeting of the GST Council with disagreement between some states and Centre regarding the Centre’s administrative control of service tax assessees, a decision which was agreed upon in the first meeting of the council. As a result, minutes of meeting held on September 23 were not approved by the council in its meeting.  Five rules framed for the purpose of GST have been taken up and approved by the Council.

Third GST council meeting

The GST Council, in the meeting held on 03.11.2016 finalized the GST tax rate structure.  The Council has opted for a four tier rate structure of 5%, 12%, 18% and 28%.  The essential items like food grains will have a zero rate.  According to the decision, 150 essential items in the consumer price index basket will attract zero tax. 

5% tax – For mass consumption goods like butter, ghee;

12% tax – It is one of the standard rate;

18% tax – It is another standard rate;

28% tax – Luxury goods will attract this tax;

0% tax – 50% of Consumer Price Index basket items, food grains like rice and wheat, spices

The above tax rate must be approved by the Parliament in the Winter Session which is going to be held on 19.11.2016 but not able to get approved.   A committee of officers/Secretaries will finalize the exact tax rate on each item and bring it to the slab closet to the current tax.

The Council recommended the collection of Cess to compensate State for their revenue loss.  The proceeds from this cess and the clean energy cess will jointly constitute the pool from which States would be compensated for any revenue loss.  This cess would have a sunset clause of five years. 

Fourth meeting of GST Council

The Centre and the states failed to emerge with a consensus on the issue of dual control at the fourth meeting of the GST Council on Friday. Out of the five options proposed in the meeting, the Council will now explore two options of horizontal or vertical division of tax assessees for dual control, an issue which has been pending since the second Council meeting on September 30 when differences emerged on the details of the arrangement.

Fifth meeting of GST council

The fifth meeting held on 02.12.2016 was inconclusive as the impasse over the issue of assessee jurisdiction continued.  The Council is also yet to approve the drafts of supporting legislations such as the Central GST and State GST, Integrated GST, and a law detailing compensation to states for loss of revenue in the first five years of the roll-out.

Sixth meeting of GST council

The 6^th meeting was conducted in the shadow of demonetization, whose fallout has put a serious question mark on implementing GST by 01.04.2017, the target fixed by the Central Government.  This two day meet focused on finalizing three legislations viz., Central GST, State GST and compensation bill but the same has not been achieved except up to Sections 99 of Model GST law have been discussed

Seventh meeting of GST council

Primary draft of CGST and SGST bills were cleared;

Redrafting of one clause in the draft compensation bill.  Compensation is to be paid to States on a bi-monthly basis instead of on quarterly basis as in the draft bill.

Eighth meeting of GST Council

he deadlock over the GST continued in this meeting with the Centre and State refusing to budge from their respective positions on issues like control of tax payers and taxing high sea trade, a stalemate that threatens to delay the roll out till September.

Ninth meeting of GST Council

In the meeting held on 16.01.2017 the following issues were decided by the GST Council-

• Centre, States agree on horizontal division of assessees;
• States to tax 90% of assessees with GST turnover of ₹ 1.5 crore or less and Centre gets the reminder;
• Beyond this threshold limit, the assessees would be taxed in a 50:50 ratio by the Centre and States;
• Barring select cases, only the Centre will levy and collect IGST;
• ‘Place of supply’ issue was resolved; assessment to be done by the Centre;
• States will be permitted to tax economic activity in high seas up to 12 nautical miles.

Roll out of GST

The Finance Minister said that July 1, 2017 appears to be more realistic as a target date for GST’s roll out.  Since GST is a transactional tax, it can be introduced at any time.

Finalization of draft

The GST council will meet again on 18.02.2017.   The technical group of officers will finalize the draft legislations for the Central, State and IGST and compensation in the mean time.  Once the drafts are cleared they would go the respective legislative bodies for approval.  The respective officers will work on the fitment of commodities into various tax slabs which will be taken in the month of March 2016.  The threshold time fixed will give some time for industry to prepare for transformation to GST.

Discussions to this article

[Ganeshan Kalyani]

Nice article sir.