GST | Legislative Framework | Constitutional Provisions | Article 279A | GST Council | Role of GST Council | Guiding Principle of Council

 

Legislative Framework

India has adopted a dual GST model

Central Goods and Service Tax Act, 2017 (CGST Act, 2017)

• CGST is a revenue source of the Central Government.

• CGST levied and collected by central government,  on intrastate supplies of taxable goods or services or both.

State Goods and Service Tax Act 2017, (SGST Act, 2017)

• SGST is a revenue source of the respective state government or union territory with state legislature.

• State and Union Territories have their own legislation levying SGST on intrastate supplies of goods or services or both.

• Following three union territories with legislature.

1. Delhi
2. Jammu and Kashmir
3. Puducherry

Union Territories Goods and Service Tax Act, 2017 (UTGST Act, 2017)

• UTGST is levied and collected by union territories without legislature on an intrastate supply of taxable goods or services or both.

• Following five union territories without legislature

1. Lakshadweep
2. Daman and Diu and Dadra and Nagar Haveli
3. Andaman and Nicobar Islands
4. Ladakh
5. Chandigarh

Integrated Goods and Service Tax Act, 2017 (IGST Act, 2017)

• Interstate supplies of taxable goods and/or services are subject to IGST

• IGST is the sum total of CGST and SGST/UTGST and levied by the Central Government on all interstate supply.

• The revenue of interstate sales will not be accrue to the exporting state and the  exporting state will be required to transfer to the central government the credit of SGST or UTGST used in payment of IGST.

Compensation Cess

(Compensation to States) Cess Act, 2017

GST compensation cess at specified rate has been imposed under the goods and services tax (compensation to states) Cess Act, 2017 on the specified luxury items or demerit goods like pan masala,  tobacco,  aerated  waters,  motor  cars, etc computed on value of taxable supply.

• Compensation cess provides for the compensation of loss to the states arising due to implementation of goods and services tax in India.

• Cess shall be computed on the value of taxable supply.

• Taxpayers can use input tax credit of cess for payment of cess liability on outward supply made by him.

• If a taxpayer is registered under composition levy, cess is not applicable on outward supplies made by him.

• Cess is not levied on exports made from India. The exporter can claim a refund of the input tax credit of cess paid on purchases.

• The Financial year  2015-16 shall be taken as base year for the purpose of calculating compensation amount payable to the states.

• The projected growth rate shall be 14% .

• The proceeds of the cess  shall be credited to the fund called goods and service tax compensation fund and all the compensation payable to the states as GST compensation shall be paid from this fund. The balance if any left out in the GST compensation fund after 5 years For such period as may be prescribed (extended upto 31/03/2026) shall be equally shared between the central government and state government.

GST Common Portal

GSTN Portal

• GSTN stands for goods and service tax network. 

• The GSTN Shall provide a shared IT infrastructure and services to Central and State. Governments, taxpayers and other stakeholders (Accounting Offices, Banks and RBI) for implementation of GST.

• Goods and Service Tax Network (GSTN) is a company incorporated under the provisions of Section 8 of the Companies Act, 2013.

• https://www.gst.gov.in website managed by GSTN.

Functions of GSTN

• Facilitating registration.

• Forwarding the returns to the central and state authorities.

• Computation and settlement of IGST.

• Matching of tax payment details with banking network.

• Providing various MIS reports to the Central and the State Governments based on the taxpayer return information.

• Providing analysis of taxpayers' profiles.

• On registration on the common portal each taxpayer will receive 15 alpha numeric PAN  based unique goods and service tax identification numbers.

GSPs / ASPs

• GSTN has selected certain information technology, Information Technology enabled services and financial technology companies, to be called GST Suvidha providers (GSPs).

• GSP is an effective and innovative platform for taxpayers to access GST portal services starting from registration and invoicing to completion of GST return filing.

• GSPs May take the help of Application Service Providers (ASPs)  who act as a link between taxpayers and GSPs.

Constitutional Provisions

GST Council: Article 279A

• Article 279A of the constitution empowers the President to constitute the goods and service tax Council (GST Council). 

• The GST Council which will be a joint forum of the Central and State Government shall consist of the following members.

1. Union Finance Minister  [Chairperson]
2. The Union Minister of state in charge of revenue of finance  [Member]
3. The Minister in charge of finance or taxation or any other Minister nominated by each state government [Members] 
4. The members of the goods and service tax council (GST Council) may be, choose one amongst themselves to be the vice-chairperson of the council for such a period as they may decide. [Clause 2(c)]

What would be the role of the GST Council?

The GST Council make recommendations to the Union and the states on -

• 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 GST.

• Model GST laws, principles of levy, apportionment of IGST and the principles that govern the place of supply.

• The threshold limit of turnover below which the goods and services may be exempted from GST.

• The rates include floor rates with bands of GST.

• 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 North East States ( Arunachal Pradesh, Assam, Manipur, meghalaya, Mizoram, Nagaland, Sikkim, Tripura), Jammu and Kashmir,  Himachal Pradesh and Uttarakhand.

• The date on which the GST shall be levied on petroleum crude, high speed diesel, motor spirit (i.e. petrol), natural gas, aviation turbine fuel.

• Any other matter relating to the GST, as the Council may decide.

What is the guiding principle of GST Council?

• The mechanism of the GST Council would ensure harmonization of different aspects of GST between the Centre and the States as well as among States.

• The GST council, in its discharge of various functions, shall be guided by the need for a harmonized structure of GST and for the development of a harmonized national market for goods and services. 

How are decisions taken by the GST Council?

• Every decision of the GST Council shall be taken at a meeting by a majority of not less than 3/4th of the weighted votes of the members present and voting.

• The vote of the central government shall have a weightage of one-third of the votes cast and the votes of all the state governments taken together shall have a weightage of two-third of the total votes cast in that meeting.

• One-half of the total number of members of the GST Council shall constitute the quorum at its meeting.

What is the validity of GST Council proceedings or actions?

No act or proceedings of the GST Council shall be invalid merely by reason of -

• Any vacancy in, or any defect in, the constitution of the Council; or

• Any defect in the appointment of a person as a member of the Council; or

• Any procedural irregularity of the Council not affecting the merits of the case.