In order to amend the Constitution to enable introduction of GST, the Constitutional (122nd Amendment) Bill, 2014 was introduced in the Parliament. The Constitution Amendment Bill was passed by the Lok Sabha in May, 2015. The Bill with certain amendments was finally passed in the in the Rajya Sabha on 3rd August, 2016 and thereafter by the Lok Sabha on 8th August, 2016. The Constitution Amendment Bill was passed by more than 15 States and received Hon’ble President’s assent on 8th of September, 2016 and has been enacted as the 101st Constitution Amendment Act, 2016 conferring simultaneous power upon Parliament and the State Legislatures to make laws governing goods and services tax and creation of Goods and Services Tax Council.
As per Article 279A(1) of the Constitution, the GST Council had to be constituted by the President within 60 days of the commencement of the Constitution (One Hundred and First) Amendment Act, 2016. The notification for bringing into force Article 279A with effect from 12th September, 2016 was issued on 10th September, 2016.
As per Article 279A(2) of the Constitution, the GST Council shall consist of the following members: -
a) The Union Finance Minister
b) The Union Minister of State in charge of Revenue or Finance
c) The Minister in charge of Finance or Taxation or any other Minister nominated by each State Government
d) Any person nominated by the Governor of the State where there is a proclamation of emergency under Article 356 of the Constitution of India.
As per Article 279A(4), the GST Council shall make recommendations to the Union and the States on issues related to GST such as the goods and services that may be subjected to or exempted from GST, model GST Laws, principles of levy, principles that govern place of supply, threshold limits, GST rates including the floor rates with bands, special rates for raising additional resources during natural calamities/disasters, special provisions for certain States, etc.
The Union Cabinet approved setting up of the GST Council on 12th September, 2016 and also setting up its Secretariat, with its office in New Delhi. Following provisions were also made:
(a) Appointment of the Secretary (Revenue) as the Ex-officio Secretary to the GST Council;
(b) Inclusion of the Chairperson, Central Board of Excise and Customs (now Central Board of Indirect Taxes and Customs), as a permanent invitee (non-voting) to all proceedings of the GST Council;
(c) Creation of one post of Additional Secretary to the GST Council in the GST Council Secretariat and four posts of Commissioner. The GST Council Secretariat is manned by officers taken on deputation from both the Central and State Governments. On 16th September, 2016, Government of India issued notifications bringing into effect all the sections of Constitutional Amendment Act setting firmly into motion the rolling out of GST. This notification set out an outer time limit of one year, that is till 15th September, 2017 for bringing into effect GST.
Rules for conduct of business in GST Council
The first meeting of the GST Council was held on 22nd and 23rd September, 2016, and since then, the Council meets periodically to deliberate and decide on various issues related to GST.
In general, the GST Council takes decisions through a consensus-based approach during its meetings. However, where any proposal is put to vote, the vote of the Central Government shall have a weightage of one-third of the total votes cast in that meeting, the votes of all the State Governments taken together shall have a weightage of two-thirds of the total votes cast in that meeting and the proposal shall be carried if the total weighted votes of the members present and voting in favour of the proposal is equal to or greater than three-fourths.
55 meetings of the GST Council have been held thus far, and its decisions have had a significant impact on the GST implementation in India. Some important decisions taken by the GST Council are -
- The e-Way Bill mechanism was approved in the 24th GST Council meeting for encouraging self-reporting by businesses. Further, e-Invoices were integrated with e-Way Bill system and GST returns, promoting ease of doing business.
- Under the special scheme introduced for real estate sector, the Council in its 33rdand 34th meetings approved the reduction of the effective rate from 12% to 5% on non-affordable and from 8% to 1% on affordable housing scheme applicable to properties under construction.
- The GST Council in its 35th Meeting approved the roll out of e-Invoicing system in GST, a digital mechanism for generating and reporting invoices in a standardized format under the GST regime in India. The e-Invoicing threshold has been further reduced and it is made mandatory for firms with annual turnover of ₹5 crore or more to issue e-Invoices for business-to-business supplies from August 1, 2023.
- For promoting green energy initiatives, the GST Council in its 36th Meeting approved the reduction of GST rates on all the electric vehicles from 12% to 5% and exemption from GST for electric buses having occupancy capacity of more than 12 people.
- The GST Council in its 42ndMeeting approved the QRMP scheme for small scale business.
- As a relief measure during COVID-19 pandemic, the Council in its 43rdand 44th Meeting approved the rationalization of duty on specified COVID related goods.
- Simplification and auto-population of GST Returns, making compliance easier for taxpayers. Introduction of the dynamic QR code on invoices to facilitate digital payments.
- Rate Rationalization: 227 Items under 28% GST slab reduced to 35 items.
- The GST Council in its 47th Meeting approved certain trade facilitation measures by way of amendment in CGST Rules like change in formula for calculation of refund in inverted duty cases, further waiver of late fees for delay in filing of GSTR-4, additional modes for payment of tax, etc.
- The Council in its 49th Meeting recommended the creation of Goods and Services Tax Appellate Tribunal (GSTAT) having the Principal Bench at New Delhi and State benches at locations as recommended by the Council based on request of the State Governments.
- With a view to facilitate taxpayers, the Council in its 52nd Meeting recommended an amnesty scheme for filing of appeals against demand orders in cases where appeal could not be filed within the specified time period.
- The GST Council, in its 53rd Meeting, recommended waiving interest and penalties for demand notices in cases not involving fraud, suppression, or wilful misstatement, etc., for the fiscal years 2017-18, 2018-19, and 2019-20, provided that the full tax demanded is paid by 31.03.2025. The Council recommended the rollout of biometric-based Aadhaar authentication for registered applicants on a pan-India basis in a phased manner.
- In its 54th Meeting, the Council has recommended roll out of a pilot project for B2C e-invoicing.
- In its 55th meeting, the GST Council has recommended that no GST on transaction of vouchers as they are neither supply of goods nor supply of services. It has also recommended to simplify the provisions related to vouchers. GST Council also recommended amendment in CGST Act, 2017 and CGST Rules, 2017 to provide a legal framework in respect of functionality of Invoice Management System (IMS). The Council also recommended to fully exempt GST on gene therapy.
The GST regime has laid the foundation for a seamless national market, reshaping India's tax landscape and driving economic growth. In this process the GST Council has demonstrated flexibility in responding to challenges by frequently reviewing and amending policies. The dynamic approach allowed for course corrections, ensuring that the tax system evolved to meet the needs of businesses and the economy and has strengthened the idea of co-operative federalism in India.