The future of GST hangs in the balance

Introduction

• The GST compensation issue has been a bone of contention between the centre and state governments threatening to undermine both India’s fiscal federalism and Centre-State relations.

News:

• Many states have accepted the proposal made by the Central Government while many others have rejected it. In this background, the GST compensation issue could be put to vote in the GST Council meeting.
• Around twenty members of the GST Council have agreed to the Centre’s proposal and around 11 States have opposed the Centre’s plan. Every State irrespective of its contribution to the GST revenues has equal weight in the GST Council.
• The GST Council has 31 States and Union Territories represented.
• Twelve votes can veto a proposal in the GST council.

GST Council:

• As per Article 279A (1) of the amended Constitution, the GST Council had to be constituted by the President within 60 days of the commencement of Article 279A.
• As per Article 279A of the amended Constitution, the GST Council would be a joint forum of the Centre and the States.

Mandate:

• The Goods & Services Tax Council is a constitutional body for making recommendations to the Union and State Governments on issues related to Goods and Service Tax.
• As per Article 279A (4), the Council will 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, principles that govern Place of Supply, threshold limits, GST rates including the floor rates with bands, special rates for raising additional resources during natural calamities/disasters, special provisions for certain States and also any other matter relating to the goods and services tax, as the Council may decide.
• The Goods and Services Tax Council shall also help establish a mechanism to adjudicate any dispute —
  • between the Government of India and one or more States; or
  • between the Government of India and any State or States on one side and one or more other States on the other side; or
  • between two or more States, arising out of the recommendations of the Council or implementation thereof.

Membership:

• The GST Council is chaired by the Union Finance Minister and other members are the Union State Minister of Revenue or Finance and Ministers in charge of Finance or Taxation of all the States.

Decision-making process:

• One-half of the total number of members of the Goods and Services Tax Council shall constitute the quorum at its meetings.
• Every decision of the Goods and Services Tax Council shall be taken at a meeting, by a majority of not less than three-fourths of the weighted votes of the members present and voting, wherein the vote of the Central Government shall have a weightage of one-third of the total votes cast, and the votes of all the State Governments taken together shall have a weightage of two-thirds of the total votes cast, in that meeting.