What is GST Council?
On July 1, 2017, India changed to a completely new tax system — the goods and services tax regime. To help the country adjust to this massive shift, the government created the GST Council. This tax advisory committee plays an important part in deciding how the GST affects your company and customers.
What Is the Role of the GST Council?
The main role of the GST Council is to make recommendations to the central and state governments about how the GST law should be enforced and changed. This could include anything that falls under the regime. In fact, the Council’s mandate gives it the freedom to handle “any other matter” related to the tax law. Some of the main issues the Council handles include:
- Deciding which goods and services are exempt from the tax
- Choosing the revenue thresholds that determine whether or not your business needs to register for GST
- Setting the GST rates for each type of product and service
- Adjusting GST rates during a national disaster
- Deciding when the GST should apply to petroleum products
Chances are, your company has already experienced the effects of the GST Council’s actions. In November of 2017, the Council cut the GST rate on most restaurants to 5% and took away the input tax credit. In January of 2018, it reduced GST rates on 29 goods and 53 services.
The Council also has another important job — it has to create a way to settle disputes over the GST law. This might be between the central government and the states or between states.
How Does the Council Make Decisions?
The GST Council is influential; a single decision can have a big impact on your business. For that reason, the Council is supposed to make decisions that support harmony in the tax system and the national market. To make sure this happens, the Council has to follow several rules and can only do business at official meetings. Before it can make a recommendation, at least half of the members need to be at a meeting.
When the Council votes, it needs a 75% majority to pass the recommendation. The votes from representatives of the central government are weighted at one-third while votes from representatives of the state governments are weighted at two-thirds. This ensures that the central government never outweighs the states.
Who Are the Members of the Council?
The GST Council is a large group. The chairperson is the union finance minister and the other member from the central government is the union minister of state in charge of revenue or finance. In addition, each state in India can pick one representative to join the Council. Usually, they nominate the minister in charge of finance or taxation, but are free to choose any other state minister. The chairperson of the Central Board of Excise and Customs is always welcome to attend meetings, though they can’t vote. The chairperson is the only officer that’s automatically chosen by the GST law. The Council also chooses a vice chairperson and sets a term limit.
If you run a business, the GST Council’s recommendations can have a significant impact on your company. By staying updated on the results of each Council meeting, you can help your company prepare for changes to the GST law.