GST Council: Structure, Members, Composition, Meetings and Functions

Explore the GST Council’s structure, role, and impact on India’s tax system, including its influence on policies, compliance, and economic growth.

The Goods and Services Tax (GST) Council is the most important in the governance of indirect taxes in India. Formed by the Constitution of India, Council is responsible for reviewing and monitoring the process of GST execution as well as its reforms across the country. It is made up of members from both the central government and state government departments which guarantee coordinated decision making of important taxes. 

This guide will, therefore, discuss formation and gst council composition, its roles and responsibilities, decision making processes and its role in shaping India’s economic system. Besides, we will point to the results of some of the recent meetings and how these influence change in policies.

What is GST Council?

The GST Council is a constitutional body established in India under Article 279A of the Indian Constitution to regulate and make decisions regarding the Goods and Services Tax (GST). It plays a critical role in ensuring the smooth implementation of GST, which is a unified indirect tax system aimed at simplifying taxation in the country.

GST Council: Vision and Mission 

The GST Council has a vision to establish a clear, systematic and progressive taxation structure that supports economic progress and Central State collaborative working. Its mission is to address issues of fair taxation, simplify the process of taxation, increase front line services to taxpayers, and sustain economic stability through equal administration of taxes and compensation of states.

• In its essence, the GST Council is targeting the creation of Tax friendly to investor’s advocate economic efficiency as well as the longevity of India’s federal system based on cooperative federalism that is in tune with the country’s long-term goals of growth and development.
• The Council’s mission is to ensure fair tax rates, improve compliance, enhance taxpayer services, and guarantee state compensation, fostering a stable, uniform tax system across India.

Formation of the Goods and Services Tax (GST) Council

The GST Council has been set up under the 101st Constitutional Amendment Act and is an important part in the structure of India’s indirect taxation. Formed under Article 279A, the Council is needed to monitor the GST applicability and the standardisation of taxes throughout the country. The Union Cabinet approved the creation of the GST Council on 12th September 2016, along with the formation of its Secretariat, which is located in New Delhi.

• Constitutional Basis of the GST Council

Accordingly, the GST Council has been enacted by Article 279A of the Indian Constitution. It authorises the President to form the Council, involving the Union Finance Minister, the State Finance Ministers and others for efficient running of GST in India.

• First GST Council Meeting

The First GST council meeting was held on 22.09.2016 at New Delhi. It provided the backdrop for major choices to be had about the rate of taxation, method of GST implementation and move towards an integrated system of indirect taxation. This meeting can be considered as a mile- stone event in the process of tax reforms in India.

Functions of GST Council

The GST Council is instrumental in shaping India’s tax system, with several core responsibilities that ensure smooth GST implementation across the country. Its key functions include:

• GST Rate Recommendations: The Council assesses and recommends changes in taxation that include rates and classifications of commodities that come under different slabs to ensure; that tax rates accord with the prevailing economic factors and welfare of the public.
• Tax Exemptions and Reductions: The Council sets exclusions to some items and services and can even propose changes in taxes within its sector of specialty.
• Policy Formulation and Amendments: It also prepares and redraws the strategies pertaining to the GST laws reflecting governmental policies and economic stability.
• Dispute Resolution: The Council also deals with inter-state and centre-state disputes – this includes issues to do with; taxation, jurisdiction among others.

• Implementing Simplified Compliance: It works to streamline the burdens of tax for all through recommending changes making it easier for business and individuals to file and pay taxes.

By way of performing these functions, the GST Council has framed a just, equitable, proper and sound tax system facilitating growth, clarity and cooperative federalism.

GST Rate Recommendations

The Fitment Committee that is part of the GST Council evaluates the ability of different goods and services to bear tax amounts and advises on the correct rate. This way, Introduction of GST rates supports the growth of the entire economic sector, benefits the business houses and keep the consumer interest in mind. From the Council’s recommendations it becomes manageable to arrange the tax slabs since the society as well as the government interest is put into consideration.

GST Compliance and Enforcement

GST Council standardised GST compliance for restoring dexterity; and dispenses circulars for the purpose of clarity. These circulars provide directions to the business on matters of procedure to ensure that they are harmonised throughout the country. The Council also oversees compliance enforcement to and also addresses concerns and recommends adjustments to ease the process for improved tax compliance.

GST Compensation to States

In order to reduce losses of revenue for that an equal amount of compensation mechanism is provided by the Council for states. This mechanism awards states the revenue shortfall for five years. In the process of transition it enhances fiscal federalism by guaranteeing states’ solvency, and preserves the balance of tax revenues in India.

Structure of GST Council

The GST Council comprises key representatives from both the central and state governments, reflecting India’s federal structure. The Council’s design ensures collaborative decision-making to maintain uniformity and efficiency in the implementation of GST across the country.

• GST Council Composition

The GST Council Members consist of the Union Finance Minister, who serves as the chairman, and one Finance Minister from each state. It also includes members from various central and state government organisations, reflecting the federal structure of the country.

The Council is the governing body of GST, with 33 members—2 from the centre and 31 from 28 states and 3 Union Territories with legislation.

• Chairman of GST Council (2024)

According to the GST act and as of today, the Union Finance Minister of India Nirmala Sitharaman chairs the GST Council. The role of the council under her leadership is to formulate most of the policies concerning the rate and structure of tax among other matters concerning the GST. 

• Voting and Decision-Making Process

The GST Council has a structure of voting majority where the Centre gets 1/3rd votes and the rest 2/3rd votes belong to all the states. The majority of the time it takes a vote where the central and state governments collectively decide matters sensitive to GST such as GST rates, policies and the rest. This system guarantees both levels of government a huge input into the formulation of GST regulations.

Recent and Upcoming GST Council Meetings

The recent meetings of The GST Council are the 53rd council meeting held in 2024, was also the constitutional board that introduced new taxes, discussed taxes rates, the issue of compliance, and mechanisms of strengthening the digital tax system. Future sessions are likely to focus on preparing more changes to the rates and adopting measures to improve the functionality of filing GST returns as well as the structure of compensations to states.

Upcoming Meetings and Agenda (2024)

Future GST Council meetings planned for 2024 continue to involve tax rate standardisation, implementation of more digital solutions for compliance and adjustment of tax exemptions. It could also deliberate over changes in the current legal structure of e-commerce selling portals, modifications in the GST Returns mechanism and additional efficiencies in the compensation process for the states.

Challenges Faced by the Goods and Services Tax (GST) Council

Several challenges have been realised by the GST Council over the implementation of the system including the following; Revenue shortfalls have remained persistent, non-compliance to the law by the public and the various states have continued to disagree over various aspects of the system.

Some of the major challenges that still persist include the difficult task of making sure that states receive sufficient revenue to compensate for their losses, the many issues of GST compliance especially to the small businessmen.

• Revenue Shortfalls and Compensation Issues

Compensating states for potential revenue losses has been a significant challenge. The GST Council must manage the compensation fund, especially during economic downturns, to ensure fiscal balance and that states do not face financial distress due to the new tax regime.

• Complexity of GST Compliance

Small and medium businesses experience a lot of challenges in GST mainly in filing returns, e-Way bill and documentation. The laws are rather complicated and besides, there are numerous intricacies within the codes and regulations that provide lawyers with an opportunity to make the work of non-tax lawyers rather complicated thus causing delays, penalties and general lack of taxes compliance.

Role of GST Council in Economic Growth and Tax Reforms

The GST Council has responsibility in developmental growth of India’s economy by its best taxation policy for business enhancement and revenue improvement. Through rationalisation of taxes and increasing compliance, the Council has contributed towards the enhancement of the efficiency thus enhancing the economies stability.

• Economic Impact of GST Council Decisions

Gst rate changes and rules of the Council have reflected anywhere, leading to changes in the sectors, which are instrumental to business performance. Many industries such as manufacturing, retail trade and services sectors simplify their process and have got the relief of taxes that has helped all in the process of formation and growth of economic sectors.

• Taxpayer Benefits from GST Council Reforms

The GST Council has modified the system to enhance the experiences of stakeholders through avoiding the misuse of Input Tax Credit (ITC), decreasing costs of compliance and fighting against tax fraud. Companies and organisations have little hindrances in managing tax issues which makes it easier to conduct business in the legal structures as compared to past years the government on the other hand ensures proper collection and equitable taxes.

Conclusion on GST Council

It can also be said that thanks to the work of the GST Council, India has achieved progressive outcomes in the sphere of taxation, increased the transparency of tax legislation, and improved the general environment in the sphere of economic activities of the country. Coordinated by the Council, problems remain solved with regard to tax rates, exemptions, and state compensations whereas the ease of business has been enhanced with its decisions. In its current form, the GST Council has not ceased to discover further efficiencies in taxation and the Indian economy is preparing for those changes in the future.

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FAQs on GST Council

How does the GST Council handle disputes between the Center and states?

The GST Council has a built-in dispute resolution mechanism, where conflicts over GST rates, compliance, and revenue distribution are addressed through mediation and consensus-building, ensuring a cooperative federal structure.

What is the role of the GST Secretariat in the Council’s functioning?

The GST Secretariat provides administrative support, managing logistics, preparing agenda papers, maintaining records, and assisting with policy implementation to ensure smooth operations across states.

How are the GST Council’s circulars and notifications implemented?

The GST Network (GSTN) disseminates the Council's circulars in real-time to tax officials and taxpayers, facilitating compliance updates, clarifications, and procedural changes through its digital platform.

Can individual states suggest GST rate changes to the Council?

Yes, individual states can propose changes or new exemptions, which are reviewed by the Fitment Committee before being discussed and decided upon in Council meetings.

How does the GST Council’s decision impact small and medium enterprises (SMEs)?

The GST Council considers SMEs in its decisions, aiming to simplify compliance, reduce GST rates on essential goods and services, and improve the ease of doing business for smaller enterprises.

What is the process for taxpayers to raise concerns to the GST Council?

Taxpayers can raise concerns through their state representatives, submit feedback to the Fitment Committee, or use the online grievance redressal system available on the GSTN portal.

Has the GST Council faced any legal challenges in its decisions?

Yes, certain decisions, like those on compensation distribution or rate changes, have faced legal challenges. The Council reviews such issues to ensure they align with legal and constitutional requirements.

What measures does the GST Council take to prevent tax evasion?

The Council implements anti-evasion measures such as the e-way bill system, audits, data analytics through GSTN, and stricter penalties for non-compliance to ensure higher tax revenue and prevent evasion.

How does the GST Council collaborate with other ministries or bodies?

The GST Council works closely with the Ministry of Finance, the Central Board of Indirect Taxes and Customs (CBIC), and other regulatory bodies to ensure the seamless implementation of GST laws across sectors.