GST

Background of the Goods and Services Tax Council

The 101st Amendment Act of 2016 paved the way for the introduction of a new tax regime (i.e.
goods and services tax – GST) in the country. The smooth and efficient administration of this tax
requires cooperation and coordination between the centre and the states.
In order to facilitate this consultation process, the amendment provided for the establishment of a
GST Council.
The amendment inserted a new Article 279-A in the Constitution of India. This article empowered
the President to constitute a GST Council by an order.
Accordingly, the President issued the order in 2016 and constituted the Council. The Secretariat of
the Council is located in New Delhi. The Union Revenue Secretary acts as the ex-officio Secretary
to the Council.
Vision and Mission of the GST Council
While discharging its functions, the Council is to be guided by the need for a harmonised
structure of GST and the development of a harmonised national market for goods and
services.Further, the Council has to determine the procedure in the performance of its functions.
The vision and mission of the Council are as follows:
Vision: To establish the highest standards of the cooperative federation in the functioning of the
Council, which is the first constitutional federal body vested with powers to take all major
decisions relating to GST.
Mission: Evolving by a process of wider consultation, a GST structure, which is information
technology driven and user friendly.

Composition of the Goods and Services Tax Council

The Council is a joint forum of the centre and the states and consists of the following members:
1. The Union Finance Minister as the Chairperson
2. The Union Minister of State in-charge of Revenue or Finance
3. The Minister in-charge of Finance or Taxation or any other Minister nominated by each state
government
The members of the Council from the states have to choose one amongst themselves to be the
Vice-Chairperson of the Council. They can also decide his term.
The Union Cabinet also decided to include the Chairperson of the Central Board of Excise and
Customs (CBEC) as a permanent invitee (non-voting) to all proceedings of the Council.
Working of the GST Council
The decisions of the Council are taken at its meetings. One-half of the total numbers of members
of the Council is the quorum for conducting a meeting. Every decision of the Council is to be
taken by a majority of not less than three-fourths of the weighted votes of the members present
and voting at the meeting.
The decision is taken in accordance with the following principles:
(i) The vote of the central government shall have a weightage of one-third of the total votes cast
in the meeting.
(ii) The votes of all the state governments combined shall have a weightage of two-thirds of the
total votes cast in that meeting.
Any act or proceeding of the Council will not become invalid on the following grounds.
(i) Any vacancy or deficit in the constitution of the Council
(ii) Any defect in the appointment of a person as a member of the Council
(iii) Any procedural irregularity of the Council not affecting the merits of the case.

Functions of the Goods and Services Tax Council

The Council is required to make recommendations to the centre and the states on the following
matters:
1. The taxes, cesses and surcharges levied by the centre, the states and the local bodies that
would be merged in GST.
2. The goods and services that may be subjected to GST or exempted from GST.
3. Model GST Laws, principles of levy, apportionment of GST levied on supplies in the course of
inter-state trade or commerce and the principles that govern the place of supply.
4. The threshold limit of turnover below which goods and services may be exempted from GST.
5. The rates include floor rates with bands of GST.
6. Any special rate or rates for a specified period to raise additional resources during any
natural calamity or disaster.
7. Special provision with respect to the states of Arunachal Pradesh, Assam, Jammu and
Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and
Uttarakhand.
8. Any other matter relating to GST, as the Council may decide.
In addition, the council shall also recommend the date on which the GST may be levied on
petroleum crude, high-speed diesel, petrol, natural gas and aviation turbine fuel.
The Council also has to recommend the compensation to the states for the loss of revenue arising
on account of the introduction of GST for a period of five years. Based on the recommendation,
the Parliament determines the compensation.
Goods and Services Tax Network (GSTN)
It is a not for profit, non-Government, private limited company incorporated in 2013.
The Government of India holds 24.5%equity in GSTN
All States including NCT of Delhi and Puducherry, and the Empowered Committee of
State Finance Ministers (EC), together hold another 24.5%.
Balance 51% equity is with non Government financial institutions.
The Company has been set up primarily to provide IT infrastructure and services to the
Central and State Governments, tax payers and other stakeholders for implementation of the
Goods and Services Tax (GST).
After rolling out of GST, the Revenue Model of GSTN shall consist of User Charge to be
paid by stakeholders who will use the system and thus it will be a self-sustaining
organization.
The benefits of Goods and Service Tax (GST)
GST is beneficial not only for the business and industry but also for the government and
consumers. Here, we bring the ten benefits of Goods and Service Tax (GST).
1. Easy compliance:
A robust and comprehensive IT system would be the foundation of the GST regime in India.
Therefore, all taxpayer services such as registrations, returns, payments, etc. would be available to
the taxpayers online, which would make compliance easy and transparent.
2. Uniformity of tax rates and structures:
GST will ensure that indirect tax rates and structures are common across the country, thereby
increasing certainty and ease of doing business. In other words, GST would make doing business
in the country tax neutral, irrespective of the choice of place of doing business.

3. Removal of cascading:
A system of seamless tax credits throughout the value-chain, and across boundaries of States,
would ensure that there is minimal cascading of taxes. This would reduce the hidden costs of
doing business.

4. Improved competitiveness:
Reduction in transaction costs of doing business would eventually lead to improved
competitiveness for the trade and industry. World Bank believes that the implementation of the
Goods and Service Tax (GST), combined with the dismantling of inter-state check-posts, is the
most crucial reform that could improve the competitiveness of India’s manufacturing sector.
E-way bill
E-way bill is an electric document generated on the GST Portal, which is a common and
shared information technology (IT) infrastructure between the  Centre and States; and acts as
evidence for movement of goods.
A company or an entity can upload relevant information prior to movement of a goods
consignment from one state to another.
Subsequently, the E-way bill for that consignment is generated via the GST portal.
It may be noted that such a mechanism helps reduce the burden of tax collection under the
GST regime and it is only applicable to transport of goods amounting to more than Rs
50,000.

National Anti-Profiteering Authority (NAA)

National Anti-profiteering Authority
National Anti-profiteering Authority was constituted by the central government to provide
an institutional mechanism under the GST law for checking the unfair profit-making activities
by the trading community.
The NAA is tasked with ensuring full benefits of reduction in tax on supply of goods or
services flow to consumers.
Composition
NAA will be headed by senior officer of level of a Secretary to Union Government and shall have
four technical members from Centre and/or States. The chairman and four members will be less
than 62 years of age.
Powers and functions
 If NAA finds that company has not passed on benefits of tax reduction, it can direct entity to
pass on benefits to consumers along with interest from the date of collection of the higher
amount till date of return of such amount.
If the beneficiary cannot be identified, NAA can ask company to transfer amount to the
‘Consumer Welfare Fund’, as provided under Section 57 of CGST Act.
In extreme cases NAA can impose a penalty on defaulting business entity and even order
cancellation of its registration under GST.
NAA also has power to cancel registration of any entity or business if it fails to pass on
benefit of lower taxes under GST regime to consumers, and empowers consumers to
approach it in case of any complaint.
GST consumer welfare funds
The GST law also provides for the creation of a Consumer Welfare Fund wherein undue benefits
made by businesses under the GST law have to be deposited, in case it cannot be passed on to
the identified recipient. The proceeds from the GST consumer welfare fund can be given as grant
to the Centre and state governments as well as regulatory authorities.
Why the profiteering is rampant in India?
According to the anti-profiteering laws in India, businesses have to pass on the benefit of tax cuts
as well as tax rebates to consumers. But the businesses often increase prices to commensurate
with the reduced taxes due to the free nature of the market.
Also, there are no explicit guidelines for companies which they are required to follow so that the
benefit of tax rebates and rate reductions on raw materials are passed on to consumers at the
right measure across all final products. As a result, the NAA is witnessing a large number of
complaints related to overcharging.

HSN Code or SAC

Among industry classification systems, Harmonized System (HS) Codes are commonly used
throughout the export process for goods.
The Harmonized System is a standardized numerical method of classifying traded
products.
It is used by customs authorities around the world to identify products when assessing
duties and taxes and for gathering statistics.
The HS is administrated by the World Customs Organization (WCO) and is updated every
five years.
It serves as the foundation for the import and export classification systems used in the
United States and by many trading partners.
The HS assigns specific six-digit codes for varying classifications and commodities.
Countries are allowed to add longer codes to the first six digits for further classification.
What is SAC?
Service Accounting Code is similar to the International HSN codes adopted by other
countries across world.
Similarly in GST the applicability of Service Accounting Codes have been defined for
identifying the applicability of the respective tax rates to the services.
What is the difference between SAC and HSN code?
HSN means Harmonized System of Nomenclature used for classifying goods under GST i.e.
Goods and Services Tax.
On the other hand the SAC means the Service Accounting Code under which services are
classified as per their inclusions in GST law.
How many digits in SAC code?
The SAC code is a 6 digit number contrary to the 8 digit HSN code.
The same is required to be mentioned in the GST invoices and GST returns.