55th GST Council Meeting

Why in News? 

The 55th GST Council meeting was held in Rajasthan. The GST meeting was chaired by Finance Minister Nirmala Sitharaman. The meeting increased GST rates on used vehicles, clarified tax rates on pre-packaged foods, and addressed compliance issues.

Key points from 55th GST Council Meeting:

• GST Rate Reduction on Fortified Rice Kernels: GST on fortified rice kernels (classified under HS code 1904) has been reduced to 5%.
• Exemption on Gene Therapy: GST exemption recommended on gene therapy treatments.
• GST Exemption on Third-Party Motor Insurance Premiums: GST exemption for contributions made by general insurance companies to the Motor Vehicle Accident Fund.
• No GST on Vouchers: GST Council clarified that vouchers are neither goods nor services, thus no GST should be levied on their transactions. The voucher-related provisions are being simplified.
• Clarification on Penalty Fees: No GST is applicable on penalty fees collected by banks and NBFCs from borrowers for non-compliance with loan terms.
• Appeal Process Revision: Reduced pre-deposit requirement for appeals before appellate authorities concerning penalty-only cases, reduced from 25% to 10%.
• GST Rate Changes on Goods:
  • GST on sales of used and old vehicles, excluding specific EVs, raised from 12% to 18%.
  • GST of 12% applicable on autoclaved aerated concrete (AAC) blocks with more than 50% fly ash.
  • Clarification on GST on pre-packaged and labeled goods with packaging exceeding 25 kg or 25 liters.
• Compliance Streamlining: Measures to simplify compliance procedures, including updates on reverse charge mechanisms for unregistered persons and changes in the process for filing GST returns.

What is the GST Council?

The Goods and Services Tax (GST) Council is a government body formed to oversee and regulate the GST framework in India. 

• Its primary objective is to simplify the tax structure, replacing the complex array of taxes that previously existed, making the taxation process more straightforward for businesses and taxpayers alike. 
• By ensuring the smooth implementation of GST, the Council plays a vital role in unifying the country’s tax system, promoting efficiency, and reducing the tax burden on the final consumer. 
• The GST Council works to monitor and prevent fraudulent activities, safeguarding the integrity of the system. 
• It is instrumental in making GST a success across India, fostering a more transparent, cohesive, and effective tax environment that benefits all stakeholders. 

Formation of GST Council 

• The process to establish the GST Council began with the passing of the Constitution (One Hundred and Twenty-second Amendment) Bill 2016 by the Indian Parliament.
• The Bill received the President’s assent on 8th September 2016.
• As per Article 279A (1) of the amended Constitution, the formation of the GST Council had to be approved by the President within 60 days from the commencement of Article 279A.
• On 10th September 2016, the notification brought Article 279A into effect, paving the way for the creation of the GST Council.
• The first meeting of the GST Council was held on 22nd and 23rd September 2016 in New Delhi.
• The Union Cabinet approved the formation of the GST Council and its Secretariat on 12th September 2016.

Members of GST Council 

The members of the GST Council include:

• Union Finance Minister: Serves as the Chairman of the Council.
• Union Minister of State for Revenue/Finance: A key member of the Council.
• State Representatives: The Minister responsible for Finance or Taxation, or any other nominated Minister from each state government.
• Secretary (Revenue): The Secretary (Revenue) serves as the Council’s Ex-officio Secretary.
• Chairperson of the Central Board of Excise and Customs (CBEC): A non-voting, permanent invitee to the Council’s meetings.
• GST Secretariat: The GST Secretariat supports the operations of the GST Council and is managed by officers from both the Central and State Governments.
• The Secretariat is responsible for carrying out administrative tasks and ensuring the smooth functioning of the Council.
• The Central Government bears the full cost of running the Secretariat, including recurring and non-recurring expenses.
• Decision-Making Process: A 3/4 majority of the members present and voting is required for a decision.
• Centre’s Vote Share: The Centre holds 33% of the total votes.

Functions of GST Council 

• Policy Formulation and Revisions: The GST Council formulates and revises policies related to GST, including tax rates, exemptions, and rules, ensuring that they are in line with the evolving economic landscape and needs of businesses.
• Determining Tax Rates: One of the Council’s most crucial functions is to decide on the GST rate slabs for various goods and services. It ensures the appropriate rate is applied, balancing the interests of the economy, taxpayers, and consumers.
• Making Recommendations on GST Laws: The Council provides recommendations on the GST laws, including the GST Act, rules, and other regulations, to ensure they are clear, efficient, and fair for all stakeholders.
• Threshold Limit Determination: The GST Council decides the threshold turnover for businesses to be included under the GST system, ensuring that small businesses are not overburdened by tax compliance requirements.
• Addressing Exemptions: It determines which goods and services should be exempted from GST, ensuring that basic needs and essential items are not burdened by excessive taxation.
• Managing IGST and Inter-State Taxation: The Council sets the principles for Integrated Goods and Services Tax (IGST), which applies to inter-state trade and commerce. It ensures smooth taxation between states and the central government.
• Special Provisions for Certain States: The GST Council establishes special provisions for states like Jammu & Kashmir, Himachal Pradesh, Uttarakhand, and the Northeastern states, addressing their unique economic and geographical concerns.
• Addressing Disputes and Concerns: It provides a platform to resolve disputes between the Centre and States, as well as between States, regarding the implementation of GST laws and tax collection.
• Monitoring and Reviewing GST Implementation: The Council regularly reviews the implementation of GST, ensuring that it remains effective, addresses emerging challenges, and simplifies the taxation process for businesses and consumers. 
• Adapting to Economic Changes: The GST Council is tasked with making necessary adjustments to the tax structure in response to economic shifts, such as changes in trade patterns, inflation, and global economic conditions.

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