About
- The GST Council is a joint forum of the Centre and the States.
- It was set up by the President as per Article 279A (1) of the amended Constitution.
Background
- The Goods and Services Tax regime came into force after the Constitutional (122nd Amendment) Bill was passed by both Houses of Parliament in 2016.
- More than 15 Indian states then ratified it in their state Assemblies, after which the President gave his assent.
Members of the GST Council
- The members of the GST Council include the Union Finance Minister (chairperson), and the Union Minister of State (Finance) from the Centre.
- Each state can nominate a minister in charge of finance or taxation or any other minister as a member.
Functions
- The GST Council, according to Article 279, is meant to “make recommendations to the Union and the states on important issues related to GST, like the goods and services that may be subjected or exempted from GST, model GST Laws”.
- It also decides on various rate slabs of GST.
- For instance, an interim report by a panel of ministers has suggested imposing 28 % GST on casinos, online gaming, and horse racing.
Goods and Services Tax
About
- GST was introduced through the 101st Constitution Amendment Act, 2016.
- It is one of the biggest indirect tax reforms in the country.
- It was introduced with the slogan of ‘One Nation One Tax’.
- The GST has subsumed indirect taxes like excise duty, Value Added Tax (VAT), service tax, luxury tax, etc.
- It is essentially a consumption tax and is levied at the final consumption point.
Tax Structure under GST
- Central GST to cover Excise duty, Service tax, etc.
- State GST to cover VAT, luxury tax, etc.
- Integrated GST (IGST) to cover inter-state trade.
- IGST per se is not a tax but a system to coordinate state and union taxes.
- It has a 4-tier tax structure for all goods and services under the slabs- 5%, 12%, 18%, and 28%.
Reasons for introducing GST
- To mitigate the double taxation, cascading effect of taxes, multiplicity of taxes, classification issues, etc., and has led to a common national market.
- The GST that a merchant pays to procure goods or services (i.e. on inputs) can be set off later against the tax applicable to the supply of final goods and services.
- The set-off tax is called the input tax credit.
- The GST avoids the cascading effect or tax on tax which increases the tax burden on the end consumer.
