TAX LAWS-II

Defects in Old System

1. Cascading Effect: Both central and state Government levy tax on the same goods. Former
levy tax on manufacture of goods and the later levy VAT on sale of very same goods. State
Government does not permit credit of excise duty paid by the manufacture to the dealer on sale of
goods. Thus, VAT is also payable on excise duty component of the price resulting in cascading
effect. Similarly, service tax is payable on rendering of service. No credit of service tax paid on
input service used in selling of goods is provided by the state government. So, tax is levied on tax.
It boosted inflation.

2. Multiplicity of Tax/Cess: Multiple taxes were levied in pre-GST regime like Excise duty,
VAT, Entry tax, luxury tax, Entertainment tax, Service tax, Octroi etc. These taxes were in additions
to various cesses imposed by State and Central Government like Krishi Kalyan Cess, clean energy
cess etc. All this made the tax structure very cumbersome.

Basic Concept of GST

1. Value Added Tax: GST is a value added tax levied on manufacture, sale and consumption
of goods and services.

2. Chain of Tax Credits: GST offers comprehensive and continuous chain of tax credits from
the producer's point/service provider's point upto the retailer's level/consumer‟s level thereby
taxing only the value added at each stage of supply chain.

3. Borne by Final Consumer: The supplier at each stage is permitted to avail credit of GST
paid on the purchase of goods and/or services and can set off this credit against the GST payable
on the supply of goods and services to be made by him. Thus, only the final consumer bears the
GST charged by the last supplier in the supply chain, with set-off benefits at all the previous stages.

4. No Cascading Effect: Since only the value added at each stage is taxed under GST, there
is no tax on tax or cascading of taxes under GST system. GST does not differentiate between goods
and services and thus, the two are taxed at a single rate.
Benefits of GST

GST is a consumption and “destination based” tax system, unlike the earlier System which were
based on origin of sale or manufacture. This feature reduces the regressive impact of indirect taxes.
So, GST brings benefits to all the stakeholders namely industry, Government and consumer.

1. Integrated National Market: GST aims to make India a common market with common
tax rates and procedures and remove the economic barriers thus paving the way for an integrated
economy at the national level. This will ensure seam less and smooth movement of goods and
service across the nation.

2. Elimination of Cascading Effect: Cascading of tax occurs when each successive transfer
is being taxed inclusive of previous tax levied. At certain occasions, a particular activity is taxed
by both Center and State Government which leads to duality of taxes. This results in cascading
effects of Taxes. GST will overcome the problem of tax cascading through Input Tax Credit
Mechanisms and ultimate burden of taxes to be paid would be on the consumer of Goods and
Services.

3. Removal of Multiplicity of Taxes: GST will remove all the multiple taxes which are levied
in the present regime. Duties & Taxes like Excise Duty. Value Added Tax, Entry Tax, Luxury Tax,
Entertainment Tax, Octroi, and Services Tax shall subsume under GST. There shall remain only
one tax called GST. It will bring transparency and ease of doing business in India.

4. Increase in GDP: GST will certainly bring ease of doing business in India. It is expected
that the Ease of Doing Business Index of India which remains around 140 shall fall to double
figures. It will certainly bring trust and faith in the taxation regime, leading to huge capital inflow
from
Foreign Investors. There shall be boom in the manufacturing as well as service sector leading to
GDP Growth.

5. Efficient Administration by Government: GST is a fully automated tax regime. From

filing of returns to refunds to assessment proceedings everything shall be online. There shall be
least physical interaction between the taxpayer and the revenue authorities. Online System is set
to bring transparency, lower corruption and better administration by the Government.

Constitutional Background of GST

Power to levy and collect taxes whether, direct or indirect emerges from the Constitution of India.
In case any tax law, be it an act, rule, notification or order is not in conformity with the Constitution,
it is called ultra vires the Constitution and is illegal and void.

Article 265 of the Constitution of India prohibits arbitrary collection of tax. It states that “no tax
shall be levied or collected except by authority of law”. The term “authority of law” means that
tax proposed to be levied must be within the legislative competence of the Legislature imposing
the tax.

Power to levy Goods and Services Tax (GST) has been conferred by Article 246A of the
Constitution which was introduced by the Constitution (101st Amendment) Act, 2016.

Provisions of Constitution of India Dealing with GST

• Article 246A: Power to make laws with respect to Goods and Services Tax This article grants
power to Centre and State Governments to make laws with respect to GST imposed by Centre or
such State. Centre has the exclusive power to make laws with respect to GST in case of interState
supply of goods and/or services.

• Article 269A: Levy and collection of GST on inter-State supply Article 269A stipulates that GST
on supplies in the course of inter-State trade or commerce shall be levied and collected by the
Government of India and such tax shall be apportioned between the Union and the States in the
manner as may be provided by Parliament by law on the recommendations of the Goods and
Services Tax Council. In addition to above, import of goods or services or both into India will
also be deemed to be supply of goods and/ or services in the course of Inter -State trade or
Commerce.

• Article 366: Definitions of „Goods and Services Tax‟, „Services‟ and „State‟ Goods and
services tax means any tax on supply of goods, or services or both except taxes on the supply of
 the alcoholic liquor for human consumption. Consequently, GST can be levied on supply of all
goods and services except alcoholic liquor for human consumption.

Services means anything other than goods.

Definition of “goods”: The term goods has already been defined under clause (12) of Article 366
in an inclusive manner to provide that “goods include all materials, commodities, and articles”.

• Article 279A: GST Council

Article 279A of the Constitution empowers the President to constitute a joint forum of the Centre
and States namely, Goods & Services Tax Council (GST Council).

The Union Finance Minister is the Chairman of this Council and Ministers in charge of
Finance/Taxation, or any other Minister nominated by each of the States & UTs with Legislatures
are its members. Besides, the Union Minister of State in charge of Revenue or Finance is also its
member.

The function of the Council is to make recommendations to the Union and the States on important
issues like tax rates, exemptions, threshold limits, dispute resolution etc. It shall also recommend
the date on which GST be levied on petroleum crude, high speed diesel, motor spirit, natural gas
and aviation turbine fuel.

Every decision of the GST Council is taken by a majority of not less than three-fourths of the
weighted votes of the members present and voting. Vote of the Centre has a weightage of onethird
of total votes cast and votes of all the State Governments taken together has a weightage of two-
thirds of the total votes cast, in that meeting.

Structure of GST

GST is a destination-based tax applicable on all transactions involving supply of goods and
services for a consideration subject to exceptions thereof. GST in India comprises of:

• Central Goods and Service Tax (CGST) - levied and collected by Central Government,

• State Goods and Service Tax (SGST) - levied and collected by State Governments/Union
Territories with State Legislatures, and;
• Union Territory Goods and Service Tax (UTGST) - levied and collected by Union Territories
without State Legislatures, on intra-State supplies of taxable goods and/or services.

Inter-State supplies of taxable goods and/or services are subject to Integrated Goods and Service
Tax (IGST). IGST is approximately the sum total of CGST and SGST/UTGST and is levied by
Centre on all inter-State supplies.

CGST has replaced the central taxes, such as central excise duty (also known as central value added
tax or CENVAT) additional excise duty, excise duty on medicinal and toilet preparations, services
tax, additional customs duty (known as countervailing duty (CVD)), special additional duty of
customs (SAD) and surcharges and cesses. As for the state taxes that SGST replaced, they include
VAT, purchase tax, entertainment tax (other than that levied by local bodies), advertisement tax,
luxury tax, taxes on lotteries, betting and gambling, octroi and entry tax, and state cesses and
Alcoholic beverages and petroleum products are kept outside of GST.

GST is implemented in India on a “concurrent dual” basis where the Centre and the States shall
have concurrent powers to levy, collect, and administer GST. The GST regime has two components
- Central GST and State/Union Territory GST. These are imposed simultaneously on every
transaction of supply that takes place within state/union territory. For interstate supply transactions,
Integrated Goods and Services Tax is imposed and collected by the Centre accordingly. In GST
regime following taxes will be levied as per their corresponding acts:

1. CGST - GST levied by Centre on transactions of supply as per CGST Act, intra-state 2017
which is applicable to all states and union territories in India.

2. SGST - GST levied by the States on intra-state transactions of supply. For this purpose,
states include those union territories that have their own legislature i.e. Delhi and Puducherry.
Respective states and UTs having own legislature have their own State Goods and Services Tax
Acts.

3. UTGST - GST levied by territories administered by the Union for transaction of supply
within the territory. There is one Union Territory Goods and Services Tax Act, 2017 applicable to
5 union territories of Andaman and Nicobar Island, Lakshadweep, Dadra and Nagar Haveli,
Daman Diu, and Chandigarh.
4. IGST - On every transaction of supply, Integrated Goods and Services Tax inter-state shall
be imposed by Centre as per IGST act 2017. This IGST shall be imposed and collected by the
Centre and shall be apportioned between Centre and the States in the manner provided by GST
Council. IGST rate shall be sum of CGST +SGST.

5. State Compensation Cess - The Central Government promised to compensate the States
for any loss of revenue due to new regime for a certain period and to a certain extent. To gather
resources for this, a compensation cess has been imposed on notified goods or services or both by
the Centre.

6. Import treated as inter-States supply and IGST will be chargeabl is e along with basic
Customs duty.

7. GST is calculated on value of supply of goods and services, which is transaction value
(explained below).

Supply Under GST

Supply will be discussed in following points:

1. Meaning and scope of supply

2. Composite supply and mixed supply

3. Time of supply

4. Value of supply

5. Place of supply

1. Meaning and Scope of Supply

The incidence of tax is the foundation stone of any taxation system. It determines the point at which
tax would be levied, i.e., the taxable event. A taxable event is that event which, on its occurrence,
attracts tax liability. In case of GST, of goods or ser supply vices or both, as the case may be, is the
taxable event. It is important to note here that supply is not the same as sale or manufacture.
Broadly, the controversies related to issues like whether a particular process amounted to
manufacture or not, whether the sale was pre-determined sale, whether a particular transaction was
a sale of goods or rendering of services etc. The GST laws resolve these issues by laying down one
comprehensive taxable event i.e.: “Supply” - Supply of goods or services or both.

GST Law, by levying tax on the „supply‟ of goods and/or services, departs from the historically
understood concepts of „taxable event‟ under the State VAT Laws, Excise Laws and Service Tax
Laws i.e., sale, manufacture and service respectively.

In the GST regime, the entire value of supply of goods and /or services is taxed in an integrated
manner, unlike the earlier indirect taxes, which were charged independently either on the
manufacture or sale of goods, or on the provisions of services.

Provisions related to supply in CGST Act.

Section 7 - Meaning and scope of supply

Section 8 - Taxability of composite and mixed supplies

Schedule I - Matters to be treated as supply even if made without consideration

Schedule II - Matters to be treated as supply of goods or as supply of services

Schedule III - Matters or transactions which shall be treated neither as supply of goods nor as supply
of services.

Section 7 of the CGST Act defines the scope of supply in an inclusive manner. The modes of supply
mentioned in Section 7(1)(a) are only in the forms of examples and the list is not exhaustive. This
is substantiated by the use of words „such as‟ in the definition. Provisions of scope of supply under
CGST Act have also been made applicable to IGST Act vide section 20 of the IGST Act.

Section 7 (1) - The expression “supply” includes:

a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence,
rental, lease or disposal made or agreed to be made for a consideration by a person in the course
or furtherance of business.
Sale Transferring the property in goods from one to
another, upon valuable consideration.

Transfer Any transfer of goods or right in goods or of

undivided share in goods without transfer of
title thereof.

Barter To exchange one commodity for another

without use of money.

Exchange To swap, to part with, give or transfer for an

equivalent with the use of money.

Licence Permission granted by competent authority to

exercise certain privileges without such
authorization the activity would have
constituted as an illegal act.

Rental Periodical payment for the use of another

property.

Lease Contractual agreement by which one party

conveys an estate in property to another party,
for a limited period, subject to various
conditions, in exchange for something of value,
but still remain ownership.

Disposal To pass or into the control of someone else; to

alienate, bestow, or part with.

b) import of services for a consideration whether or not in the course or furtherance of business;

c) the activities specified in Schedule I, made or agreed to be made without a consideration; and

d) the activities to be treated as supply of goods or supply of services as referred to in Schedule

II.

Section 7 (2) provides a negative list i.e., the activities which are neither supply of goods or supply
of services.
Section 7 (3) states that the Central Government on the recommendation of GST Council can notify
the transactions that are to be treated as supply of goods and not supply of services or supply of
services and not supply of goods or neither supply of goods or supply of services.

The definition of supply in S.7 (1) is very inclusive. Any supply of goods or services would get
covered even if not specified in any of the subsections of section 7 subsection one of CGST act.
Inclusions Exclusions

✓ Supply for consideration in course or Activities to be treated neither as Supply of

furtherance of business (Section 7(1)(a)} goods nor Supply of services {Section 7(2) +
Schedule III}

✓ Importation of services for consideration

whether or not in course or furtherance of
business (Section 7(1)(b)}
✓ Supply without consideration {Section
7(1)(c)+ Schedule I}
✓ Activities to be treated as Supply of goods
or Supply of services {Section 7 (1)(d) +
Schedule II)}

The meaning and scope of supply under GST can be understood in terms of following six
parameters, which can be adopted to characterize a transaction as supply:

1. Supply of goods or services.

2. Supply of anything other than goods or services does not attract GST.

3. Supply should be made for a consideration.

4. Supply should be made in the course or furtherance of business.

5. Supply should be made by a taxable person.

6. Supply should be a taxable supply.

7. Supply should be made within the taxable territory

Exceptions:

1. Any transaction involving supply of goods or services without consideration is not a supply,
barring few exceptions, in which a transaction is deemed to be a supply even without consideration.

2. Further, import of services for a consideration, whether or not in the course or furtherance
of business is treated as supply.

Time of Supply

The point in time when the goods or services are deemed to be supplied. The liability to pay GST
arises upon the time of supply.

CGST/SGST or IGST must be paid at the time of supply. Goods and services have a separate basis
to identify their time of supply.

Time of Supply of Goods

Time of supply of goods is earliest of:

• Date of issue of invoice

• Last date on which invoice should have been issued

• Date of receipt of advance/ payment

Example: A supplies goods to B on 5th July and issues the invoice on the same date. B pays by
cheque on 20th July and the cheque is credited to A‟s account on 22nd July. A records the receipt
of payment on 23rd July after receiving confirmation that the cheque has been cleared. The point
of supply of the goods shall be 5th July. However, in the same case, if B pays half of the
consideration in advance on 2 nd July, then in respect to such amount the point of taxation shall be
the date of receipt of such payment as recorded in his books of accounts or the date on which it is
credited to his bank account, whichever is earlier, in this case to be July 22.
Time of Supply for Services

Time of supply of services is earliest of:

• Date of issue of invoice

• Date of receipt of advance/ payment.

• Date of provision of services (if invoice is not issued within prescribed period)

The provision in respect to services is more or less similar to that in respect to goods. However, in
case of goods, where the supplier does not issue the invoice, the last date on which he is required
to issue the same under the law is to be considered, whereas in case of services, the date of
provision of services is to be considered.

Further, the provision in respect to service provides for an additional provision which states that in
case it is still not possible to determine the time of supply on the basis of the date of issue of invoice
or the date of provision of the service or the date of receipt of the payment, the date of receipt of
services as reflected in the book of accounts of the recipient of service shall be considered.

Value of Supply

The amount of GST payable is calculated by applying the rate of GST to the value of the supply.
The value of a supply of goods or services or both shall be the transaction value, which is the price
actually paid or payable for the said supply of goods or services or both where the supplier and the
recipient of the supply are not related, and the price is the sole consideration for the supply.

The value of supply shall include:

a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other
than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services
Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by
the supplier;
b) any amount that the supplier is liable to pay in relation to such supply but which has been
incurred by the recipient of the supply and not included in the price actually paid or payable for
the goods or services or both;

c) incidental expenses, including commission and packing, charged by the supplier to the recipient
of a supply and any amount charged for anything done by the supplier in respect of the supply
of goods or services or both at the time of, or before delivery of goods or supply of services;

d) interest or late fee or penalty for delayed payment of any consideration for any supply; and

e) subsidies directly linked to the price excluding subsidies provided by the Central Government
and State Governments.

Place of Supply

CGST and SGST is payable in case of intra-state trade or commerce i.e. intra-state supply of goods
and services.

IGST is payable in case of inter-state trade or commerce i.e. intra-state supply of goods and
services.

Provisions to determine whether the transaction is intra-state or inter-state are contained in IGST
Model Law. Export and import of goods and services are also covered under IGST provisions.

Principle behind the provisions - The basic principle behind provisions relating to place of supply
is that GST is destination based tax. Thus, tax is finally payable where goods and services are
consumed. This issue is relatively easy in case of goods, but not so easy in case of services. Hence,
in many cases, location of person receiving the service is relevant. If he is registered under GST,
that is taken as criteria. Even if he is not registered, address on record of recipient is taken as
criteria to determine place of supply in some cases. However, this is not so in case of services
relating to immovable property and some performance based services.

Registration Under GST

In any tax system registration is the most fundamental requirement for identification of tax payers
ensuring tax compliance in the economy. Registration of any business entity under the GST Law
implies obtaining a unique number from the concerned tax authorities for the purpose of collecting
tax on behalf of the government and to avail Input tax credit for the taxes on his inward supplies.
Without registration, a person can neither collect tax from his customers nor claim any input tax
credit of tax paid by him.

Need and Advantages of Registration

Registration will confer the following advantages to a taxpayer:

• He is legally recognized as supplier of goods or services.

• He is legally authorized to collect tax from his customers and pass on the credit of the taxes paid
on the goods or services supplied to the purchasers/ recipients.

• He can claim input tax credit of taxes paid and can utilize the same for payment of taxes due on
supply of goods or services.

• Seamless flow of Input Tax Credit from suppliers to recipients at the national level.

The provision of GST registration has been prescribed under chapter VI of the CGST Act, 2017
and Section 22 to Section 30 of the CGST Act, deals with the registration by the every supplier of
goods and services.

Liability to Register

As per Section 22 of the CGST Act, every supplier1 (GST being a tax on the event of “supply”)
needs to get registered. However, small businesses having all India aggregate turnover 2 below
Rupees 20 lakh (10 lakh if business is in Assam, Arunachal Pradesh, Himachal Pradesh,
Uttarakhand, Manipur, Mizoram, Sikkim, Meghalaya, Nagaland or Tripura) need not register.

The small businesses, having turnover below the threshold limit can, however, voluntarily opt to
register.

Persons not liable for GST Registration

Section 23 of the CGST Act, specifies that the following persons shall not be liable to registration,
namely:
(a) any person engaged exclusively in the business of supplying goods or services or both that are
not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and
Services Tax Act;

(b) an agriculturist, to the extent of supply of produce out of cultivation of land.

The Government may, on the recommendations of the Council, by notification, specify the
category of persons who may be exempted from obtaining registration.

Compulsory Registration in Certain Cases

Section 24 of the CGST Act, specified that the following categories of persons compulsorily shall
be required to take registration under GST:

a) persons making any inter-State taxable supply;

b) casual taxable persons3 making taxable supply;

c) persons who are required to pay tax under reverse charge;

d) person who are required to pay tax under sub-section (5) of section 9;

e) non-resident taxable persons making taxable supply;

f) persons who are required to deduct tax under section 51, whether or not separately registered
under this Act;

g) persons who make taxable supply of goods or services or both on behalf of other taxable persons
whether as an agent or otherwise;

h) Input Service Distributor , whether or not separately registered under this Act;

i) persons who supply goods or services or both, other than supplies specified under subsection
(5) of section 9, through such electronic commerce operator who is required to 5 collect tax at
source under section 52;

j) every electronic commerce operator;

k) every person supplying online information and database access or retrieval services from a place
outside India to a person in India, other than a registered person; and

l) such other person or class of persons as may be notified by the Government on the
recommendations of the Council.

Manner of Registration Under GST

Section 25 of the CGST Act, specified the manner of registration by the various taxable person as
under:

1) Every person who is liable to be registered under section 22 or section 24 shall apply for
registration in every such State or Union territory in which he is also liable within 30 days from
the date on which he becomes liable to registration.

• In case of a casual taxable person or a non-resident taxable person shall apply for
registration at least 5 days prior to the commencement of business.

• In case of any person who makes a supply from the territorial waters of India shall obtain
registration in the coastal State or Union territory where the nearest point of the appropriate
baseline is located.

2) Any person who is seeking registration under GST shall be granted a single registration in a
State or Union territory.

• In case a person having multiple business verticals in a State or Union territory may be granted a
separate registration for each business vertical.

3) A person, though not liable to be registered under section 22 or section 24 of the CGST
Act, may get himself voluntarily and comply the all provisions of GST Act as applicable to a
registered person.

4) A person who has obtained or is required to obtain more than one registration, whether in
one State or Union territory or more than one State or Union territory shall, in respect of each such
registration, be treated as distinct persons for the purposes of the GST Act.
5) Where a person who has obtained or is required to obtain registration in a State or Union
territory in respect of an establishment, has an establishment in another State or Union territory,
then such establishments shall be treated as establishments of distinct persons for the purposes of
the GST Act.

6) Every person shall have a Permanent Account Number issued under the Income-tax Act,
1961 in order to be eligible for grant of registration.

7) Where an eligible person fails to obtain registration, the proper officer may take suitable
action as per law.

8) Any specialized agency of the UNO or any other organisation as notified by the
commissioner shall be granted Unique Identity Number for all purposes including refund of taxes.

9) The registration or Unique Identity Number shall be issued as per procedure or shall be
deemed to have been granted within period of 7 days.

Amendment of GST Registration

Section 28 of the CGST Act, specified the provision of amendment of GST registration, every
registered person or a person to whom a Unique Identity Number has been issued shall inform the
proper officer of any changes in the information of registration within 15 days of the said changes.

The proper office may approve or reject the amendment in the registration of such particulars but
the proper officer shall not reject the application for registration without giving the person an
opportunity of being heard.

Cancellation of GST Registration

1) Section 29 of the CGST Act, provides the procedure for cancellation of GST registration either
by the proper officer or an application filed by the registered person or by his legal heirs in the
following circumstances where,-
a) the business has been discontinued, transferred fully for any reason including death of the
proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or

b) there is any change in the constitution of the business; or

c) the taxable person, other than the person registered as voluntarily , is no longer liable to be
registered under section 22 or section 24.

2) The proper officer may cancel the registration of a person from such date, including any
retrospective date, as he may deem fit, where,––

a) a registered person has contravened such provisions of the Act or the rules made thereunder as
may be prescribed; or

b) a person paying tax under section 10 ( composition levy scheme ) has not furnished returns for
three consecutive tax periods; or

c) any registered person, other than a person specified in clause (b), has not furnished returns for
a continuous period of six months; or

d) any person who has taken voluntary registration under sub-section (3) of section 25 has not
commenced business within six months from the date of registration; or

e) registration has been obtained by means of fraud, wilful misstatement or suppression of facts:

f) Provided that the proper officer shall not cancel the registration without giving the person an
opportunity of being heard.

3) The cancellation of registration under this section shall not affect the liability of the person
to pay tax and other dues under this Act or to discharge any obligation under this Act or the rules
made thereunder for any period prior to the date of cancellation whether or not such tax and other
dues are determined before or after the date of cancellation.

4) The cancellation of registration under the State Goods and Services Tax Act or the Union
Territory Goods and Services Tax Act, as the case may be, shall be deemed to be a cancellation of
registration under this Act.
5) Every registered person whose registration is cancelled shall pay an amount, by way of
debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax
in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in
stock or capital goods or plant and machinery on the day immediately preceding the date of such
cancellation or the output tax payable on such goods, whichever is higher, calculated in such
manner as may be prescribed:

6) Provided that in case of capital goods or plant and machinery, the taxable person shall pay
an amount equal to the input tax credit taken on the said capital goods or plant and machinery,
reduced by such percentage points as may be prescribed or the tax on the transaction value of such
capital goods or plant and machinery under section 15, whichever is higher.

7) The amount payable under sub-section (5) shall be calculated in such manner as may be
prescribed.

GST COUNCIL

GST council is a governing body to regulate and directs each and every step for
the implementation of goods and service tax in the nation with decisions over
tax rates and further implementation measures. GST council assimilates
suggestions and regulation into one form and improvise the changes formally
through notifications and circulars with its departments and finance ministry.

The birth of the GST Council is attributed to the 101st Amendment Act of 2016,
which ushered in a new tax regime, the goods and services tax (GST), in India.
The efficient implementation of this tax needed a harmonious relationship and
coordination between the centre and the states.

To facilitate this interaction, the amendment proposed the formation of a GST

Council. Subsequently, a new Article 279-A was added to the Constitution of
India, giving the President the power to establish a GST Council by an order.

Following this, the President constituted the Council in 2016. The Council's
Secretariat is located in New Delhi, and the Union Revenue Secretary serves as
the ex-officio Secretary to the Council.
The Council aims to set the highest standards of cooperative federation in its
functioning, being the first constitutional federal body with the power to make
all major decisions related to GST.

The Council strives to evolve a GST structure that is driven by information

technology and user-friendly through extensive consultation.

GST Council Constitution

According to Article 279A, it is on the part of the president to give the order to
constitute the council of GST within 60 days from the 12th of September 2016
which is already notified by the Government.

Following are the designated personnel, who will form the GST Council together:-

o The Union Finance Minister, who serves as the Chairperson

o The Union Minister of State in-charge of Revenue or Finance
o The Minister in-charge of Finance or Taxation or any other Minister nominated
by each state government
The state members of the Council elect one among themselves to be the Vice-
Chairperson of the Council and also decide his term. The Union Cabinet has also
included the Chairperson of the Central Board of Excise and Customs (CBEC)
as a permanent invitee (non-voting) to all proceedings of the Council.

How the GST Council Operates

The Council makes decisions at its meetings, with a quorum of half of the total
members required to conduct a meeting. Every decision requires a majority of
not less than three-fourths of the weighted votes of the members present and
voting.

The voting principles are as follows:

(i) The central government's vote carries a weightage of one-third of the total
votes cast.

(ii) The combined votes of all the state governments carry a weightage of two-
thirds of the total votes cast.

The Council's actions or proceedings will not be invalidated on the grounds of

any vacancy or deficit in the Council's constitution, any defect in a person's
appointment as a Council member, or any procedural irregularity not affecting
the case's merits.

Functions of the GST Council

The GST Council has the following key roles and responsibilities:

o It decides which goods and services will be subject to GST and which will be
exempted. This is a critical aspect of ensuring fair taxation across different
sectors.
o The council is responsible for proposing Model GST Laws, which serve as the
framework for implementing GST across the country.
o It formulates principles that dictate the place of supply, which is essential to
determine where goods and services are taxed.
o The council also establishes threshold limits for GST. This is important in
determining which businesses are required to register for GST.
o It sets GST rates, including floor rates with bands. This is crucial in ensuring
that the tax burden is equitably distributed.
o The council can propose special rates to raise additional resources during times
of natural calamities or disasters. This is an important measure to ensure the
government has the necessary funds to respond effectively in such situations.
o Lastly, the GST Council can make special provisions for certain States. This
allows for flexibility in tax implementation to accommodate unique state need.