The Role and Function of the GST Council in India

When the Goods and Services Tax rolled out on 1 July 2017, it wasn’t just a change in tax rates – it was a fundamental reimagining of how the Centre and the States would share fiscal authority. Sitting at the heart of this new arrangement is the GST Council, a constitutional body that decides almost every important question about how GST works: which goods fall under which slab, what gets exempted, when rates change, and how disputes between governments get resolved. Understanding the Council is essential to understanding modern Indian tax administration.

The constitutional foundation of the GST Council 🔗

The GST Council is not a creation of ordinary legislation. It is a constitutional body established by Article 279A of the Constitution, which was inserted through the 101st Constitutional Amendment Act, 2016. The Constitution Amendment Bill received the President’s assent on 8 September 2016, granting both Parliament and State Legislatures simultaneous power to make laws on GST and creating the Council as the forum where they would coordinate.

The timeline was tight by design. Article 279A(1) required the President to constitute the GST Council within 60 days of the amendment coming into force, and the Union Cabinet approved its formation on 12 September 2016. The first meeting followed almost immediately, on 22 and 23 September 2016, setting the stage for the GST rollout the following year.

Why place it in the Constitution? 🔗

Placing the Council within the Constitution was a deliberate choice. It elevated GST decision-making above the level of ordinary executive bodies, giving the Council a permanent and protected role in India’s fiscal architecture. This constitutional status means the Council cannot be dissolved or restructured without a constitutional amendment, which insulates it from political churn and ensures continuity in tax policy.

Composition of the Council 🔗

The GST Council is deliberately designed as a joint forum where both levels of government sit at the same table. As per Article 279A of the amended Constitution, the Council is a joint forum of the Centre and the States, and its membership reflects this federal character.

The members are:

The Union Finance Minister – who serves as the Chairperson of the Council and presides over its meetings.

The Union Minister of State in charge of Revenue or Finance – who sits as a member representing the Central Government.

The Minister in charge of Finance or Taxation of each State, or any other Minister nominated by the State Government – forming the bulk of the Council’s membership.

Members from the States elect one of their own as Vice-Chairperson, whose tenure the members themselves decide. The Council presently has 33 members – two from the Centre (the Union Finance Minister and the Minister of State for Finance) and 31 from States and Union Territories with legislatures. The Chairperson of the Central Board of Indirect Taxes and Customs (CBIC) also attends as a permanent invitee, though without voting rights.

The Secretariat 🔗

The Council is supported by a Secretariat based in New Delhi. The Union Revenue Secretary serves as the Ex-officio Secretary to the Council, and the Secretariat is staffed by officers on deputation from both Central and State governments. The entire expense of running the Secretariat is borne by the Central Government, which removes any financial constraint on its functioning.

Functions and powers under Article 279A(4) 🔗

The heart of the Council’s work is laid out in Article 279A(4), which lists the matters on which it makes recommendations. These include the goods and services that may be subjected to or exempted from GST, model GST laws, principles of levy, rules on place of supply, threshold limits, GST rates including floor rates with bands, and special rates for raising additional resources during natural calamities or disasters.

What the Council actually decides 🔗

In practical terms, the Council’s work spans several categories:

Taxes to be subsumed: It identifies which existing Central, State, and local taxes, cesses, and surcharges should be merged into GST. Taxes like Central Excise Duty, Service Tax, State VAT, octroi, and entry tax were folded into GST on the Council’s advice.

Coverage of goods and services: It decides which items fall within the GST net and which remain exempt. It periodically reviews this list – bringing items in or taking them out depending on economic and social considerations.

Rate structures: It recommends the tax slabs and the specific rates applicable to thousands of goods and services. At the 56th meeting held on 3 September 2025, for example, the Council approved a sweeping rationalisation – moving from the earlier four-tier structure to a simpler three-slab regime of 5%, 18%, and a special 40% slab for demerit and luxury goods.

Threshold limits: It sets the turnover levels below which a business need not register for GST, balancing compliance burden with revenue needs.

Special provisions: It can recommend special rates during natural calamities and special provisions for specific States, including the north-eastern and hill States.

Petroleum products: Under Article 279A(5), the Council decides the date from which GST will apply to crude oil, diesel, petrol, natural gas, and aviation turbine fuel, which remain outside GST for now.

Decision-making and the weighted voting system 🔗

One of the most innovative features of the Council is how it takes decisions. Rather than a simple majority vote – which would privilege either the Centre or the States – Article 279A(9) creates a carefully calibrated weighted voting system.

Every decision must be taken by a majority of not less than three-fourths of the weighted votes of the members present and voting. The Central Government’s vote carries a weightage of one-third of the total votes cast, and the votes of all State Governments taken together carry a weightage of two-thirds. One-half of the total members must be present to form the quorum.

This arithmetic has important consequences. The Centre cannot push through a decision on its own – it needs substantial State support. Equally, the States cannot override the Centre, because no resolution can pass without the Centre’s weight behind it. The system forces negotiation and compromise. In fact, the Council generally takes decisions through a consensus-based approach during its meetings, and formal voting has been rare.

Dispute resolution 🔗

Disputes between governments over GST are inevitable. Article 279A(11) requires the Council to set up a mechanism to adjudicate disagreements – between the Centre and one or more States, between two groups of States, or between two or more States – that arise out of the Council’s recommendations or their implementation. This keeps conflicts within an institutional framework rather than letting them spill into political confrontation or prolonged litigation.

The recommendatory nature of the Council’s advice 🔗

A critical question that shaped GST jurisprudence is whether the Council’s recommendations are legally binding. The Supreme Court answered this definitively in Union of India v. Mohit Minerals Pvt. Ltd. (2022).

The Court held that the recommendations of the GST Council are not binding on the Union and the States, and should only be persuasive. The reasoning rested on the interaction between Article 246A and Article 279A. Article 246A gives Parliament and State Legislatures equal and concurrent power to legislate on GST, and neither is required to table the Council’s recommendations. The absence of a repugnancy clause – unlike Article 254, which governs conflicts between Central and State laws – further supported the view that the Council’s recommendations have persuasive rather than mandatory force.

Why the ruling matters 🔗

In theory, this ruling could have destabilised the entire GST regime. If any State could simply ignore a Council decision and set its own rates, the promise of “One Nation, One Tax” would collapse. In practice, the Union Government observed that the law has always used the word “recommendation” and not “mandate”, and that this ruling simply clarifies the existing framework. Most States have continued to adopt Council decisions, both because the high three-fourths threshold effectively builds consensus before a decision is made, and because unilateral deviation would complicate compliance and deter investment.

Harmonised structure as a guiding principle 🔗

A subtle but important constitutional instruction sits in Article 279A(6). While discharging its functions, the Council must be guided by the need for a harmonised structure of goods and services tax and the development of a harmonised national market. This principle acts as the north star of the Council’s work. Every rate decision, every exemption, every procedural rule must – at least in spirit – move India closer to a unified economic space where goods and services flow without tax-induced friction across State borders.

The Council in action: recent trajectory 🔗

The GST Council has met over 56 times since its formation, making it one of the most active intergovernmental bodies in India. Its deliberations have shaped nearly every dimension of the indirect tax system. The 56th meeting in September 2025 marked a historic shift, rationalising the four-tier rate structure into two principal slabs – 5% and 18% – with a special 40% slab for a narrow set of demerit goods. Individual health and life insurance policies were exempted, several essential items moved to nil or lower rates, and the GST Appellate Tribunal was set up to finally give taxpayers an effective forum to resolve disputes.

These reforms show the Council continuing to evolve. From the design phase in 2016-17 to steady-state administration in later years, and now to a second wave of rationalisation, the Council has proved itself to be a dynamic institution that responds to economic conditions, compliance feedback, and political realities.

The Council as an example of cooperative federalism 🔗

Perhaps the most significant contribution of the GST Council goes beyond tax policy. It has institutionalised a forum where the Centre and the States routinely negotiate over a shared fiscal domain. Before GST, indirect taxation was deeply fragmented – each State acted largely on its own when it came to sales tax, VAT, entry tax, and a host of local levies. The Council compels coordination.

This is not without friction. States occasionally voice disagreement over rate decisions, compensation payments, and the pace of reforms. But the existence of a constitutional body – where the Finance Minister of the smallest State sits with the Union Finance Minister and both must be accommodated in every decision – is itself a remarkable exercise in federal governance. It reflects a mature acknowledgement that economic union requires institutions capable of resolving the tensions that inevitably arise between a Central authority and sub-national governments.

What do you think? Given that the Supreme Court has ruled GST Council recommendations to be only persuasive, do you believe this weakens India’s “One Nation, One Tax” ambition – or does it actually strengthen federalism by preserving State autonomy? And as the Council continues to reshape the rate structure, how should it balance the competing goals of consumer relief, revenue adequacy, and administrative simplicity?

References

1. https://www.constitutionofindia.net/articles/article-279a-goods-and-services-tax-council/
2. https://gstcouncil.gov.in/gst-council-0
3. https://www.drishtijudiciary.com/to-the-point/ttp-constitution-of-india/article-279a-the-gst-council
4. https://www.gstcouncil.gov.in/gst-council
5. https://padhai.ai/blogs-padhai/gst-council-upsc-exam
6. https://www.taxtmi.com/article/detailed?id=15061
7. https://www.avalara.com/blog/en/europe/2022/05/india-igst-liability-of-ocean-freight-and-legal-force-of-gst-council-recommendations.html
8. https://forumias.com/blog/the-supreme-courts-judgment-on-gst/
9. https://www.ey.com/en_in/technical/alerts-hub/2025/09/gst-council-announces-major-rate-rationalization-and-trade-facilitation-measures