Jul 19, 2025
15
mins read
The GST Council, formed under Article 279A by the 101st Amendment of the Indian Constitution Act (2016), is a constitutional joint forum of the Union and States for GST policy-making. Chaired by the Union Finance Minister, its membership includes the Union Minister of State for Finance and all State Finance Ministers, with the CBIC Chairperson as a non-voting invitee and a Secretariat based in New Delhi. The Council recommends tax rates, exemptions, laws, compliance rules, and special provisions, representing cooperative federalism and driving ‘One Nation, One Tax.’
Constitutional Body: The GST Council is a constitutional body established in 2016 under Article 279A by the 101st Constitutional Amendment Act It serves as an apex forum for the Centre and States to jointly decide on Goods and Services Tax (GST) matters.
Mandate: It makes recommendations to the Union and State governments on key GST issues, including tax rates, exemptions, rules, and special provisions. This ensures a coordinated approach to indirect taxation across India.
Cooperative Federalism: The GST Council exemplifies cooperative federalism by uniting the Centre and all States for decision-making. It is designed to foster a harmonized national market (One Nation, One Tax) and to streamline the indirect tax regime across India
Secretariat: The GST Council’s Secretariat is located in New Delhi, providing administrative support for its operations.
To know more about the major Constitutional Bodies refer to this blog : Constitutional Bodies for UPSC: A Comprehensive Guide to Their Roles, Functions & Removal
Smooth Implementation: Ensure the smooth implementation and administration of Goods and Services Tax throughout the country, resolving issues to avoid disruption
Simplification: Simplify the tax structure by eliminating cascading taxes (tax-on-tax) and reducing compliance costs for taxpayers.
Prevent Tax Evasion: Monitor GST processes to prevent fraud and tax evasion, thereby improving transparency in the tax system.
Unified Market: Foster a unified domestic market by reducing state-wise disparities in taxation, in line with the “One Nation, One Market” goal of GST.
Table of content
Introduction of Goods and Services Tax: GST is a comprehensive indirect tax on the supply of goods and services across India, implemented in 2017 to replace multiple indirect taxes at the central and state levels. It marked a significant tax reform aimed at unifying the Indian market.
Value-Added & Destination-Based: Goods and Services Tax is a value-added tax levied at each stage of the supply chain, but ultimately borne by the final consumer. It is destination-based, meaning the tax revenue goes to the state where the goods or services are consumed.
Components of GST: There are three main components of GST:
Central GST (CGST): Levied by the Centre on intra-state supplies.
State GST (SGST)/Union Territory GST (UTGST): Levied by individual States/UTs on intra-state supplies.
Integrated GST (IGST): Levied by the Centre on inter-state supplies of goods and services; apportioned between the exporting and importing states.
All GST rates and rules are decided jointly by the Centre and States through the GST Council’s consensus.
Subsumed Taxes: GST has subsumed numerous indirect taxes. For example, it replaced central levies like Central Excise Duty and Service Tax, as well as state levies like State VAT, Entry Tax, Luxury Tax, Entertainment Tax, Central Sales Tax, etc., consolidating them into one tax regime. This simplification reduces the cascading of taxes and complexities in the earlier system.
Goods and Services Tax Rate Structure: India’s GST is levied in multiple rate slabs (detailed in a later section), ranging from 0% (exempted or essential goods) up to 28% (luxury and demerit goods), with a special cess on certain items.
Formation (Article 279A(1)): The Constitution (101st Amendment) Act, 2016 inserted Article 279A, which mandated the President to constitute the GST Council within 60 days of the amendment’s commencement The President issued the order accordingly in 2016, leading to the establishment of the GST Council.
Recommendations on Specific Goods (Article 279A(5)): The GST Council is empowered to recommend the date from which GST will be applied to specific petroleum products (crude oil, diesel, petrol, natural gas, aviation turbine fuel) that were initially kept outside GST This allows a phased inclusion of these products into GST.
Guiding Principles (Article 279A(6)): The GST Council must be guided by the need for a harmonized structure of GST and for developing a unified national market for goods and services This constitutional principle underlines the goal of uniform tax laws across states.
Procedure (Article 279A(8)): The GST Council has the autonomy to devise its own rules of procedure for carrying out its functions This includes how meetings are conducted, agenda is set, and recommendations are finalized.
Validity of Proceedings (Article 279A(10)): Decisions or proceedings of the GST Council are protected from legal invalidity on grounds of any vacancy or defect in its constitution In other words, the Council’s recommendations remain valid even if some members’ positions are vacant or there are minor procedural irregularities.
Dispute Resolution (Article 279A(11)): The Council may establish a mechanism to adjudicate disputes arising between the Centre and states, or among states, on GST implementation This helps in resolving conflicts in a cooperative manner within the GST framework.
According to Article 279A, the GST Council is a joint forum of the Centre and the States, consisting of the following members:
Position | Member(s) |
Chairperson | Union Finance Minister (Central Government). |
Vice-Chairperson | A State Finance/Taxation Minister elected by the Council’s state members to chair meetings in the absence of the Union FM (The Council members decide the Vice-Chair’s term among themselves.) |
Central Government | The Union Minister of State (MoS) for Finance/Revenue is a voting member representing the central government in addition to the Chairperson. |
State Governments | All States’ Finance or Taxation Ministers (or any other minister nominated by each state government) are members of the Council Each state/UT with legislative assembly sends one representative. |
Permanent Invitee | Chairperson of Central Board of Indirect Taxes & Customs (CBIC) – invited to all meetings but without voting rights |
Secretariat | Union Revenue Secretary acts as the Secretary (ex-officio) to the GST Council, overseeing administrative functions |
Total Membership: Presently, the GST Council has 33 members in total – 2 from the Centre (the Union FM and the MoS Finance) and 31 from States/UTs (28 States + 3 Union Territories with legislatures). This ensures every state and UT has a seat at the table along with central representatives.
Under Article 279A(4) of the Constitution, the primary functions of the GST Council is to make recommendations to the Union and States on important aspects of GST policy Key areas on which the GST Council makes recommendations include:
Taxes Subsumed in Goods and Services Tax: Determining which central, state, and local taxes, cesses, and surcharges are to be subsumed into GST (For instance, decisions were made to subsume taxes like excise duty, service tax, VAT, octroi, etc., into GST.)
GST Coverage (Scope of Tax): Deciding which goods and services are subject to GST and which are to be exempted The Council periodically reviews items under GST to either exempt essential goods or include previously exempted items into the tax net.
Model GST Laws: Formulating and updating model GST laws and principles for levy and collection of GST This includes rules for place of supply and how to apportion IGST (tax on inter-state trade) between states The Council’s legal framework recommendations form the basis of CGST, SGST, and IGST Acts and rules.
Threshold Limits: Setting the turnover threshold for GST registration and taxation Businesses below a certain annual turnover may be exempted from GST or allowed a simplified composition scheme – these limits are decided by the Council (for example, the threshold is often around ₹20 lakh for goods in many states, with higher limits for services or special category states).
Tax Rates and Slabs: Proposing the GST tax rates applicable, including the number of rate slabs and floor rates with bands The Council has established rate slabs (e.g., 5%, 12%, 18%, 28%) and can adjust rates for specific goods/services. It also considers rate rationalization (merging or changing slabs) over time.
Special Rates for Emergencies: Recommending any special rate or cess for a specified period to raise additional resources during natural calamities or disasters For example, the Council can allow a state to levy an extra cess for disaster relief funding.
Special Provisions for Certain States: Deciding on measures for special category or northeastern states (e.g., providing exemptions or special treatment due to their unique economic profile) The Constitution allowed some flexibility for states like Assam, Jammu & Kashmir, etc., which the Council can operationalize as needed.
Any Other Matter: Making recommendations on any other issue related to GST as deemed necessary This catch-all clause empowers the Council to guide the evolution of GST in all respects.
Apart from the above, the GST Council has some specific additional mandates:
Bringing Petroleum Products under Goods and Services Tax: Recommend the date on which GST can be levied on petroleum crude, diesel, petrol, natural gas, and ATF (aviation fuel). These items are currently outside GST; the Council will decide when and how they transition into GST, balancing fiscal needs of Centre and States.
Dispute Resolution Mechanism: Establish a mechanism to resolve disputes between governments. This includes disputes:
between the Centre and one or more states,
between multiple states inter-se, or
between the Centre (along with some states) on one side and other states on the other side.
GST Compensation to States:
Recommend the compensation amount and period for states facing revenue shortfall due to GST.
The GST Council was constitutionally mandated to oversee the GST compensation for loss of revenue to states for five years after GST’s introduction (2017–2022).
Based on the GST Council’s recommendation, Parliament enacted the GST (Compensation to States) Act, 2017, which provided for bi-monthly payouts to states funded by a Compensation Cess on certain luxury and sin goods.
The initial five-year compensation period ended in June 2022; the Council now discusses extension of the cess to meet pending dues and other needs.
India’s GST system has a multi-tier tax rate structure to classify different goods and services into suitable tax slabs. The major GST rate slabs and their general application are as follows:
GST Rate | Category | Examples |
0% | Essential goods/services | Unprocessed food grains, fresh fruits, healthcare, primary education |
5% | Mass consumption items | Packaged food, life-saving drugs, economy-class air travel |
12% | Intermediate/capital goods | Fertilizers, processed foods, agrichemicals |
18% | Standard goods/services | Toiletries, smartphones, AC dining, business-class air travel |
28% | Luxury/demerit goods | Automobiles, tobacco, pan masala, luxury hotels, premium electronics |
A GST Compensation Cess applies to selected 28% items (e.g., tobacco, luxury cars) to fund state revenue losses.
Since its inception, the GST Council has met numerous times and adjusted the GST regime in response to economic needs. Notable recent decisions taken in the Council’s meetings include:
Dual GST Model Reaffirmed:
The GST Council continues to operate under the dual GST system—CGST and SGST for intra-state, and IGST for inter-state supplies—ensuring concurrent taxation by Centre and States under a unified framework.GST Rate Structure:
The Council approved four key GST slabs: 5%, 12%, 18%, and 28%, with 0% (exempt) for essentials and a compensation cess on luxury/sin goods to support state revenues.
Key Decisions from Recent GST Council Meetings:
Meeting | Focus | Major Decisions |
53rd | Industry Rationalization | - Reduced GST on paper/cardboard packaging to 12% - Unified 12% GST on all milk cans (steel, iron, aluminium) |
54th | Healthcare Relief | - Cut GST on select anti-cancer drugs (e.g., Osimertinib, Durvalumab) from 12% to 5% |
55th | Sectoral Reforms | - 5% GST on Fortified Rice Kernels (FRK) used in nutrition schemes - GST exemption for gene therapy - Raised GST on used vehicle resale margins from 12% to 18% - Reduced Compensation Cess on exports to 0.1% to boost competitiveness |
56th ( expected in July 2025) | GST rate rationalisation, Compensation Cess post-2026, Clarification on GST for intermediary services, drones |
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Ongoing Discussions:
Rate rationalization: Proposal to move from four slabs to three-tier structure.
Inclusion of excluded items: Review on bringing petroleum products under GST.
Extension of Compensation Cess: Deliberation on continuing beyond 2026 for loan repayment.
Tech Enhancements: Focus on improving GSTN portal, e-invoicing, and compliance tracking.
As India enters the next phase of GST reform, the Council stands at the forefront of steering policies toward a more efficient, equitable, and growth-oriented tax framework.
1. Rate Rationalisation & Slab Simplification
Objective: Consolidate existing four slabs (5%, 12%, 18%, 28%) into a leaner three‑tier system—likely merging 12% and 18% into a middle slab of 14–16%.
Rationale:
Simplifies compliance for businesses
Reduces classification disputes and litigation
Can enhance compliance and buoy revenues.
2. Inclusion of Excluded Products (Petroleum, ATF, Natural Gas)
Focus: Gradual integration—beginning with Aviation Turbine Fuel (ATF), followed by petrol, diesel, natural gas—into the GST net.
Benefits:
Streamlines compliance, reduces cascading inputs
Broadens tax base towards strategic sectors.
Challenges:
3. Enhancing Revenue Efficiency & Compliance
Technological integration: Leverage analytics, fraud detection, e-invoicing, streamlined assessments => improve fiscal transparency
Simplified audits & ITC norms: Relax input tax credit procedures and reduce audit burdens, easing operational pressure on businesses
4. Legal & Institutional Reform
GST Tribunal: Establish appellate tribunal with regional benches to resolve tax disputes faster and reduce litigation.
Clarity & predictability: Address classification ambiguities—especially for food/consumer items—to reduce legal uncertainty and enable smoother invoicing.
5. Consensus‑Driven Future Planning
Role of GoMs: Reports from Group of Ministers (e.g., on rate rationalisation, compensation cess) feed into Council debates
Intergovernmental dialogue: Inbuilt weighted voting (states two-thirds, Centre one-third) necessitates strong negotiation and collective vision
Focus on cooperative federalism: Core principle guiding reform-especially when reconciling Centre-State fiscal interests.
Q. Is the GST Council statutory?
A. No. It is a constitutional body created under Article 279A by the 101st Constitutional Amendment Act, 2016.
Q. Who heads the GST Council?
A. The Union Finance Minister chairs it; a State Finance Minister is elected Vice‑Chairperson.
Q. How are votes weighted?
A. Centre holds one‑third, States two‑thirds; decisions need a 75 % super‑majority of weighted votes.
Q. Which taxes did GST replace?
A. It subsumed excise duty, service tax, VAT, CST, octroi, luxury and entertainment taxes, among others.
Q. What are the GST rate slabs?
A. Five principal slabs: 0 %, 5 %, 12 %, 18 %, 28 %, plus a compensation cess on select luxury or sin goods.
Q. What are the functions of the GST council?
A. The GST Council, a constitutional body under Article 279A, recommends to the Centre and states on GST rates, exemptions, threshold limits, apportionment, special provisions for emergencies or specific states, and dispute resolution.
The Goods and Services Tax Council has become a cornerstone of India’s indirect tax governance, embodying cooperative federalism in action. By bringing the Union and all States onto a common platform, the GST Council has ensured that tax policies are decided through dialogue and consensus rather than unilateral mandates. Since its inception in 2017, the Council’s role in harmonizing tax rates, resolving conflicts, and fine-tuning the GST regime has been pivotal. It stands as a testament to the idea of “One Nation, One Tax,” helping to unify India’s market and streamline compliance for businesses.
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External Linking Suggestions
UPSC Official Website – Syllabus & Notification: https://upsc.gov.in/
Press Information Bureau – Government Announcements: https://pib.gov.in/
NCERT Official Website – Standard Books for UPSC: https://ncert.nic.in
