From UPSC perspective, the following things are important :
Prelims level : GST Council
Mains level : Commodities left out of GST purview
The GST Council might consider taxing petrol, diesel and other petroleum products under the single national GST regime.
About GST Council
- The GST Council is a constitutional body that aims to bring together states and the Centre on a common platform for the nationwide rollout of the indirect tax reform.
- It is an apex member committee to modify, reconcile or to procure any law or regulation based on the context of goods and services tax in India.
- It dictates tax rate, tax exemption, the due date of forms, tax laws, and tax deadlines, keeping in mind special rates and provisions for some states.
- The predominant responsibility of the GST Council is to ensure to have one uniform tax rate for goods and services across the nation.
How is the GST Council structured?
- The GST is governed by the GST Council. Article 279 (1) of the amended Indian Constitution states that the GST Council has to be constituted by the President within 60 days of the commencement of Article 279A.
- According to the article, the GST Council will be a joint forum for the Centre and the States. It consists of the following members:
- The Union Finance Minister will be the Chairperson
- As a member, the Union Minister of State will be in charge of Revenue of Finance
- The Minister in charge of finance or taxation or any other Minister nominated by each State government, as members.
Terms of reference
- Article 279A (4) specifies that the Council will make recommendations to the Union and the States on the important issues related to GST, such as the goods and services will be subject to or exempted from the Goods and Services Tax.
- They lay down GST laws, principles that govern the following:
- Place of Supply
- Threshold limits
- GST rates on goods and services
- Special rates for raising additional resources during a natural calamity or disaster
- Special GST rates for certain States
Why bring Petro/Diesel under GST?
- GST is being thought to be a solution for the problem of near-record high petrol and diesel rates in the country, as it would end the cascading effect of tax on tax.
- The state VAT is being levied not just on the cost of production but also on the excise duty charged by the Centre on such output.
Why were they left out of GST?
- When a national GST subsumed central taxes such as excise duty and state levies like VAT on July 1, 2017, five petroleum goods – petrol, diesel, ATF, natural gas and crude oil – were kept out of its purview.
- This is because both central and state government finances relied heavily on taxes on these products.
- Since GST is a consumption-based tax, bringing petroleum under the regime would have mean states where these products are sold get the revenue and not the producer ones.
- Simply put, Uttar Pradesh and Bihar with their huge population and a resultant high consumption would get more revenues at the cost of states like Gujarat.