In this article, I will express my own views on the Goods and Services Tax Council constituted by the President of India under Article 279A of the Constitution.
1. Creation of GST Council.─
Clause (1) of Article 279A of the Indian Constitution provides that the President shall, within sixty days from the date of commencement of the Constitution (One Hundred and First Amendment) Act, 2016, by order constitute a Council to be called the Goods and Services Tax Council.
2. Members of the Council.─
Clause (2) of Article 279A of the Indian Constitution provides that the Goods and Services Tax Council shall consist of the following members, namely:—
(a) the Union Finance Minister—Chairperson;
(b) the Union Minister of State in charge of Revenue or Finance—Member;
(c) the Minister in charge of Finance or Taxation or any other Minister nominated by each State Government—Members.
3. Vice-Chairperson of the Council.─
Clause (2) of Article 279A of the Indian Constitution provides that Members of the Goods and Services Tax Council referred to in sub-clause (c) of clause (2) shall, as soon as may be, choose one amongst themselves to be the Vice-Chairperson of the Council for such period as they may decide.
4. Powers of the Council.─
The Council is a Constitutional Body and derives its powers from the provisions of the Constitution.
5. Purpose of the Council.─
As is evident from ‘Statement of Objects and Reasons’ part of the Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014, object of the Bill had been of ─
(i) replacing a number of indirect taxes being levied by the Union and the State Governments by the Goods and Services Tax;
(ii) conferring concurrent taxing powers on the Union as well as the States including Union territory with Legislature to make laws for levying goods and services tax on every transaction of supply of goods or services or both;
(iii) removing cascading effect of taxes;
(iv) developing a common national market for goods and services.
Clause (6) of Article 279A of the Constitution provides that while discharging function conferred by the said Article, the Goods and Services Tax Council shall be guided by the need for a harmonised structure of goods and services tax and for the development of a harmonised national market for goods and services.
If the Union and the States are allowed to take their independent decisions on various goods and services tax related matters, objects aforesaid cannot be achieved. In the Constitution, Article 279A has been inserted by the Constitution (One Hundred and First Amendment) Act, 2016 for providing mechanism, by way of co-operative federalism, for achieving said objects.
6. Functions of the Council.─
The GST Council discharges functions conferred by various provisions of the Constitution. It consists of member representative of─
(i) the Union Government;
(ii) each State; and
(iii) each Union Territory which has its Legislature.
The GST Council takes each decision in a meeting. One-half of the total number of Members of the Council constitute the quorum at its meetings, and in a meeting decision is taken by a majority of not less than three-fourths of the weighted votes of the members present and voting, in accordance with the principles mentioned in clause (9) of Article 279A of the Constitution.
The GST Council has been constituted for making recommendations to the Union and the States on various matters relating to goods and services tax. Such matters are as follows:-
(1) Date from which provisions of Article 246A of the Constitution, which gives powers to Parliament, and the Legislatures of the States to make law with respect to goods and services tax, shall come into force with respect to petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel.
(2) The manner in which goods and services tax collected, on supply of goods, or services, or both in the course of inter-State trade or commerce, including a supply of goods, or services, or both which takes place in the course of import into the territory of India, shall be apportioned in between the Union and the States.
(3) The date on which the goods and services tax shall be levied on petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel.
(4) Following goods and services tax matters specified in clause (4) of Article 279A of the Constitution, namely:-
- the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the goods and services tax;
- the goods and services that may be subjected to, or exempted from the goods and services tax;
- model Goods and Services Tax Laws, principles of levy, apportionment of Goods and Services Tax levied on supplies in the course of inter-State trade or commerce under article 269A and the principles that govern the place of supply;
- the threshold limit of turnover below which goods and services may be exempted from goods and services tax;
- the rates including floor rates with bands of goods and services tax ;
- any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster ;
- special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and
- any other matter relating to the goods and services tax, as the Council may decide.
(5) Recommendation of the Goods and Services Tax Council, to provide for compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for a period of five years.
7. Limitations on decision making powers of the GST Council.─
The GST Council is a constitutional body created under the Constitution. The GST Council has to discharge functions conferred by the Constitution. The GST Council is required to take decision in the manner provided in clause (9) of Article 279A of the Constitution. Clause (6) of Article 279A of the Constitution provides that while discharging the functions conferred by the said article, the Goods and Services Tax Council shall be guided by the need for a harmonised structure of goods and services tax and for the development of a harmonised national market for goods and services.
Article 279A (6) of the Constitution lays down important economic policy in furtherance of economic unity of the country. The GST Council has to adhere to this policy while taking any decision under Article 279A of the Constitution.
(2) The GST Council cannot take a decision which results in increase or decrease of jurisdiction of States for levy of goods and services tax.
(3) Sub-clauses (a) to (g) of clause (4) of Article 279A of the Constitution require recommendation of the GST Council on matters specifically mentioned in those sub-clauses. Sub-clause (h) of said clause (4) gives discretionary power to the GST Council to make recommendation on any other matter relating to goods and services tax, as the Council may decide. All sub-clauses (a) to (h) of clause (4) of Article 279A of the Constitution are mutually exclusive. Under sub-clause (h), the GST Council can make on any goods and services tax matter which is not specified in any of sub-clauses (a) to (g) of said clause (4).
Binding nature of provisions of Article 279A for the GST Council.▬
Provisions, which require recommendation of GST Council on any matter, are of binding nature for the GST Council. Clause (4) of Article 279A of the Constitution, which requires the GST Council to make recommendation, uses words “shall make recommendation”. Secondly, in clause (6) of the said article, use of words “while discharging functions conferred by this article, the Goods and Services Tax Council shall” indicates that functions conferred by the article are to be discharged by the GST Council. Above all, the GST Council has been created for a definite purpose with definite assignments. Therefore, provisions of Article 279A of the Constitution are of binding nature for the Council.
Binding nature of GST Recommendations for the Union and the States.-
Decisions of the GST Council are taken in a meeting of the Union Minister of State in charge of Revenue or Finance and the Minister in charge of Finance or Taxation or any other Minister nominated by each State Government. For the purpose of common national cause, the Council takes decisions for the Union and all the States including Union Territories with Legislature. This is a case of co-operative federalism. Decisions taken by the GST Council have constitutional value. Goods and Services Tax is destination based consumption tax. If the Union and the States are allowed to take their independent decisions, tax leviable on supply of goods and services cannot be made destination based consumption tax. The Constitution aims at providing harmonised structure of goods and services tax and harminised national market for goods and services. Keeping in view the said policy of harmonised structure of goods and services tax and harminised national market for goods and services, the GST Council makes its recommendation to the Union and the States. Any deviation from the recommendation will mean deviation from the said national policy of providing harmonised structure of goods and services tax and harmonised national market for goods and services. Purposes for which the Constitution (One Hundred and First Amendment) Act, 2016 has been enacted will stand defeated. If the Union and the States are allowed to take their independent decisions, it will not be possible to remove cascading effect of taxes and provide for a common national market for goods and services. Hence, goods and services tax law making powers provided in Article 246A of the Constitution are to be read with recommendations made by the GST Council under Article 279A of the Constitution. In view of this, recommendations made by the GST Council are of mandatory nature for the Union and the States.
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Disclaimer: Except the quoted versions, all other views expressed here are my personal views and are meant only for academic discussion. Readers are advised to obey the law and to seek opinion of their legal advisors before acting upon the views expressed here. I and the publishers of this article disown any liability on account of any loss or damage that may be caused on account of use of views expressed here.
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