CHAPTER - 2

LEVY AND COLLECTION OF TAX UNDER GST

2.1 Introduction to GST Levy

The central and unified taxable event under the Goods and Services Tax (GST) regime is supply,
replacing the multiplicity of taxable events (like manufacture, provision of service, or sale) found in
the old tax regime.

 Basis of Levy: GST is levied on the supply of all goods and services or both.

 Key Exclusions: Supply of alcoholic liquor for human consumption is outside the purview of
GST.

 Petroleum Products: Selected petroleum products (like petroleum crude, high speed diesel,
motor spirit, natural gas, and aviation turbine fuel) are temporarily kept out of GST and will
be included from a date to be decided by the GST Council.

 Dual Structure: The GST structure is dual in nature, where the Central and State
governments simultaneously levy tax on a common base.

 Tax Paradigm Shift: GST marks a paradigm shift from an Origin-Based Tax (like the old
regime's manufacture, sale, or provision of service) to a Destination-Based Tax, where the
term 'supply' linked to the destination is the key.

2.2 Levy and Collection of Cess

Cess is levied for the purpose of providing compensation to the States for loss of revenue arising
from the implementation of GST.

 Legal Basis: Section 8 of the GST (Compensation to States) Act, 2017.

 Applicable Supplies: Cess is levied on both:

o Intra-state supplies of goods or services or both.

o Inter-State supplies of goods or services or both.

2.3 Levy and Collection of CGST, SGST, IGST, UTGST

Section 9 of the CGST Act is the charging section for the supply of goods and services under GST.

A. Central Goods and Services Tax (CGST) / State Goods and Services Tax (SGST) / Union Territory
Goods and Services Tax (UTGST)

These taxes are levied on all intra-State supplies of goods or services or both.

 Mechanism: Collected in a prescribed manner and paid by the taxable person.

 Exclusion: Intra-State supply of alcoholic liquor for human consumption is outside the
purview.
B. Integrated Goods and Services Tax (IGST)

IGST is levied on all inter-State supplies of goods or services or both.

 Exclusion: Supply of alcoholic liquor for human consumption.

 Import of Goods: IGST on goods imported into India is levied and collected in accordance
with the provisions of Section 3 of the Customs Tariff Act, 1975, on the value determined
under the said Act, at the point when customs duties are levied.

2.4 Levy of Tax and Applicable Rates

A. Conditions for Inter-State Levy

Every inter-State supply will be liable to tax if the following conditions are met:

1. There is a Supply of either goods or services or both.

2. The supply is an inter-State supply (location of the supplier and the place of supply are in
different States).

3. The tax shall be payable by a 'taxable person'.

B. Tax Rates

 Notified Rates: CGST/UTGST/SGST rates are notified by the Government on the

recommendations of the GST Council, with notified rates of 5%, 18% and 40%.

 IGST Rate: IGST will be approximately the sum total of CGST and SGST/UTGST.

 Maximum Rates: Maximum rate of CGST is 20%, while the maximum rate for IGST is 40%.

 Cess: An additional cess of 15% or other rates (on top of 40% GST) applies to items like
aerated drinks, luxury cars, and tobacco products.

 Special Rates: Rough precious and semi-precious stones are taxed at 0.25%, and gold is
taxed at 3%.

THE LEVY OF TAX ON SUPPLY OF GOODS AND SERVICES IS IN 3 PARTS

1. IN THE HANDS OF SUPPLIERS

Normal Payment: Normally, the supplier of goods or services is liable to pay GST to the
Government.
 2. Tax Payable by Electronic Commerce Operator (ECO) on Notified Services

In the case of specific notified services supplied through an Electronic Commerce Operator (ECO), the
ECO is liable to pay the tax on those supplies. All provisions of the relevant GST law apply to the ECO
as if they were the supplier.

ECO Location / Status Person Liable to Pay Tax

Located in taxable territory The ECO

Does not have physical presence in the taxable

The person representing the ECO
territory

Has neither physical presence nor any representative The person appointed by the ECO for the
in taxable territory purpose of paying tax

3. Tax on Reverse Charge Basis (RCM)

Reverse Charge is a mechanism where the liability to pay tax is on the recipient of the supply of
goods or services, instead of the supplier.

 Normal Payment: Normally, the supplier of goods or services is liable to pay GST to the
Government.

 Reverse Charge: Under RCM, the recipient becomes liable to pay the tax to the Government.

 Legal Basis: Section 9(3) of the CGST Act allows the Government to notify categories of
supply where the tax shall be paid on a reverse charge basis by the recipient.

Cases Where Reverse Charge is Applicable

 Supply from an unregistered dealer to a registered dealer.

 Services through an e-commerce operator.

 Supplier of the goods or services or both located in a non-taxable territory (Imports).

 Tax levied under RCM on an unorganized sector.

 Supply of certain goods and services specified by the Government.

2.7 Composition Levy Under GST

The Composition Scheme is an alternative, convenient, and simplified method of tax levy designed
for small taxpayers to reduce compliance costs and formalities.

A. Eligibility and Turnover Limits

 General Limit: Aggregate turnover in the preceding financial year did not cross Rs. 1.5 crore.

 North-Eastern States Limit: Turnover limit is Rs. 75 lakhs in Arunachal Pradesh, Assam,
Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, and Himachal Pradesh.
  Supplier of Services/Mixed Suppliers: An alternative scheme for suppliers of services or
mixed suppliers (not eligible for the earlier scheme) with an annual turnover up to Rs. 50
lakhs in the preceding financial year.

B. Key Features

 Tax Rate: Fixed tax rate on the total sales turnover.

 Returns: Taxpayer files summarized returns on a quarterly basis instead of three monthly
returns.

 Billing: Issues Bill of Supply and not a tax invoice.

 Records: Not required to maintain detailed records.

C. Specified Rate of Composition Levy

Category of Registered Persons CGST SGST Total

Manufacturers (other than notified goods) 0.5% 0.5% 1.00%

Restaurant services and Outdoor catering services (not serving alcohol) 2.5% 2.5% 5%

Any other supplier eligible for composition levy (Section 10) 0.5% 0.5% 1.00%

D. Limitations

 Input Tax Credit: Not eligible for Input Tax Credit (ITC)

 Inter-State Business: Cannot engage in Inter-state business.

 Charging Tax: Cannot charge tax from their customers; must pay tax from their own pocket.

 E-commerce: E-commerce transactions are outside the scope of the scheme.

 Penal Provisions: Strict penal provisions for delay in filing GSTR 4 (Rs. 100 for CGST + Rs. 100
for SGST per day, up to Rs. 5000 each).

2.8 GST Tax Structure / Tax Rates

The GST Council has rationalized the tax structure under the 'GST 2.0' framework, effective
September 22, 2025, by moving towards two common rates (5% and 18%) and a special 40% rate.
The old multi-slab regime (0%, 5%, 12%, 18%, and 28%) is being rationalized, with the 12% and 28%
slabs effectively removed/merged.

Updated GST Slab Rates (w.e.f. September 22, 2025)

Revised
Slab Description Examples of Items Moved to this Slab
GST Rate

UHT Milk (from 5%), Life-saving/cancer drugs (from 12%), Health

0% Exempt / Nil 0%
& Life Insurance (individual) (from 18%)

5% Merit / Basic 5% Dairy items like butter/ghee/cheese (from 12-18%), Processed

Goods & Services foods (from 12-18%), Soaps/shampoo/toothpaste (from 18%),
 Revised
Slab Description Examples of Items Moved to this Slab
GST Rate

Gyms/fitness centres (from 18%)

Cement (from 28%), Small/affordable vehicles, Consumer

18% Standard Rate 18% durables like fridge/AC (from 28%), Restaurant dining
(premium/AC) (from 18-28%)

Pan masala, tobacco products (from 28% + cess), Carbonated

Sin / Luxury /
40% 40% drinks (from 18-28% + cess), Luxury cars/SUVs, Two-wheelers >
Demerit Goods
$350cc$ (from 28% + cess)

 Precious Metals: Precious metals and stones retain special concessional rates: base metals at
1.5%, gold/silver/jewellery at 3%, and some uncut stones at 0.25%.

2.9 Revenue Neutral Rate (RNR)

The Revenue Neutral Rate (RNR) is the GST rate fixed by the government with the aim of keeping the
gross revenue of the government the same even after replacing multiple taxes with a single GST.

 Definition: The taxing procedure that allows the government to still receive the same
amount of money despite changes in tax laws.

 Rates: The RNR at the time of GST introduction was 15.5%, which has now been brought
down to 11.4%.

2.10 GST Council (GSTC)

The GST Council is a Constitutional Body established under Article 279A of the Constitution to take
policy decisions about the introduction and implementation of GST. It is the key decision-making
body on GST matters.

A. Composition of GST Council

 Chairperson: The Union Finance Minister.

 Member: The Union Minister of State in charge of Revenue or Finance.

 Members: The Minister in charge of Finance or Taxation or any other Minister nominated by
each State Government.

 Vice-Chairperson: Chosen by the State Government members from amongst themselves.

B. Nature of GST Council

It is a quasi-legislative-cum-administrative body because it performs both legislative and

administrative duties assigned by the Parliament.

C. Decisions of GST Council

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

 Weighted Votes:

o Vote of the Central Government has a weightage of 1/3rd of the total votes.

o Votes of all the State Governments together have a weightage of 2/3rd of the total
votes.

 Quorum: One half of the total number of members of the GST Council.

D. Functions and Powers

The GSTC makes recommendations to the Union and the States on key aspects of GST, including:

1. Taxes, cesses, and surcharges levied by the Union, States, and local bodies that may be
subsumed in the GST.

2. The goods and services that may be subjected to, or exempted from, the GST.

3. Model GST Laws, principles of levy, apportionment of IGST, and principles governing the
place of supply.

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

5. The rates including floor rates with bands of GST.

6. Special rates for a specified period, to raise additional resources during any natural calamity
or disaster.

7. Special provision with respect to certain States (Arunachal Pradesh, Assam, J&K, Manipur,
Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand).

2.11 HSN and SAC under GST

A. Harmonized System of Nomenclature (HSN)

HSN stands for Harmonized System of Nomenclature, a 6-digit code developed by the World
Customs Organization (WCO) to classify over 5,000 products globally.

 Purpose: HSN is used to classify goods, identify the rate of tax applicable, and determine the
quantity of an item traded through a nation.

 Structure: The HSN structure contains 21 sections, 99 chapters, about 1,244 headings, and
5,224 subheadings.

HSN Digits in India (Based on Aggregate Turnover)

The number of digits in the HSN code depends on the aggregate turnover in the preceding financial
year:

Aggregate Turnover in the preceding Financial Year Number of Digits of HSN Code

Up to Rs. 5 crores 4 Digits

More than Rs. 5 crores 6 Digits

For import and export trade (international trade) 8 Digits

 Mandatory Use: The 4-digit HSN Code is mandatory for taxpayers whose aggregate turnover
is up to Rs. 5 crores in the previous Financial Year for B2B Tax invoices.

 Above 5 Crores: The 6-digit HSN Code is mandatory on the supplies of Goods and Services in
both B2B and B2C tax invoices for taxpayers with an aggregate turnover of more than Rs. 5
crores in the previous Financial Year.

 Penalty: Penalty for non-mentioning or wrong HSN code is Rs. 50,000 (Rs. 25,000 for CGST
and Rs. 25,000 for SGST each).

B. Services Accounting Code (SAC)

Like goods, services are also classified uniformly for recognition, measurement, and taxation using
codes called Services Accounting Code or SAC.

 Structure Example: For legal documentation and certification services (code 998213):

o First two digits (99) are same for all services.

o Next two digits (82) represent the major nature of the service (e.g., legal services).

o Last two digits (13) represent the detailed nature of service (e.g., legal
documentation for patents)

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QUESTIONS AND ANSWERS

I - Short Answer Questions

1. Define GST Council.

The Goods and Services Tax Council (GSTC) is a Constitutional Body created under Article 279A of the
Constitution for taking policy decisions about the introduction and implementation of GST, including
exemptions, tax rates, and tax credits. It is the key decision-making body with representation from
the central government and all state governments.

2. Define Reverse Charge Mechanism.

Reverse charge means the liability to pay tax is shifted to the recipient of supply of goods or services
instead of the supplier, in respect of notified categories of supply. It is a mechanism where the
receiver becomes liable to pay the tax to the Government

3. What is Revenue Neutral Rate?

The Revenue Neutral Rate (RNR) is the GST rate fixed by the government with the aim of keeping the
gross revenue of the government the same even after it levies the GST. This rate ensures that the
revenue remains unchanged (neutral) despite the changes in tax laws.

4. What is input tax credit?

Input Tax Credit refers to the credit a business can claim for the Goods and Services Tax (GST) paid
on inputs (goods or services) used to produce taxable supplies. This mechanism helps avoid the
cascading effect of taxes, where tax is charged on top of tax

5. What is Compensation Cess?

Compensation Cess is levied for the purposes of providing compensation to the States for loss of
revenue arising on account of implementation of the goods and services tax. It is levied on both
intra-State and inter-State supplies.

6. What do you understand levy and collection of tax?

o The single and unified taxable event under GST is supply of goods or services or
both.

o The GST structure is dual in nature, where the Central and State governments
simultaneously levy tax on a common base.

o Tax is collected and payable primarily by the taxable person (supplier).

o The levy of tax is in three parts: in the hands of the supplier, in the hands of the
recipient under reverse charge mechanism, and in the hands of the electronic
commerce operator for specified services.

7. What is HSN Code?

HSN stands for Harmonized System of Nomenclature. It is a six-digit uniform code used to classify
over 5,000 products globally. This code is used for identifying the rate of tax applicable to goods.

8. What are the minimum and maximum rates of GST at present?

The notified rates for CGST/UTGST/SGST are 0%,5%, 18% and 40%. Maximum rate is 40% and
minimum rate is 5%.

9. Mention GST rates.

The updated structure of GST as on 22nd September 2025 is 0%, 5%, 18%, and 40%.

10. What is Composition Scheme under GST?

The Composition Scheme is an alternative method of levy of tax designed for small taxpayers whose
aggregate turnover in the preceding financial year did not cross Rs. 1.5 crore (or Rs. 75 lakhs in
North-Eastern States). It allows them to pay tax at a fixed rate based on turnover to escape complex
GST formalities.

11. What is 'SAC' under GST?

SAC stands for Services Accounting Code. These codes are used to classify services uniformly for
recognition, measurement, and taxation under the GST regime.

12. Expand: a) HSN b) SAC c) GSTC

o HSN: Harmonized System of Nomenclature.

o SAC: Services Accounting Code.

o GSTC: Goods and Services Tax Council.

II - Short Essay Questions

1. Briefly explain the levy and Collection of tax under GST regime.

The basis of tax levy under GST is the single, unified event called supply of goods or services or both.
It is a shift from an Origin-Based Tax to a Destination based Tax. The tax structure is dual in nature,
with the Central and State governments simultaneously levying tax.

Tax is levied in three ways:

o Normal Charge: Tax is primarily paid by the supplier (the taxable person).

o Reverse Charge Mechanism (RCM): The liability to pay tax is shifted to the recipient
of the supply for notified categories.

o E-commerce Operator (ECO): For specific notified services supplied through an ECO,
the ECO is liable to pay the tax.

2. Describe the concept of Reverse Charges Mechanism.

Reverse Charge Mechanism (RCM) is an exception where the liability to pay GST is cast on the
recipient of supply instead of the supplier.

o Statutory Provision: Section 9(3) of the CGST Act empowers the Government to
notify specific categories of supply of goods or services where the recipient shall pay
the tax.

o Applicable Cases:

 Supply from an unregistered dealer to a registered dealer.

 Services through an e-commerce operator.

 Supplier of goods or services located in non-taxable territory (e.g., Imports).

 Tax levied on an unorganized sector.

 Supply of certain specified goods and services.

o All provisions of the GST Act apply to the recipient as if they were the person liable
for paying the tax.

3. Explain the eligibility and charging of Compensation Cess.

 o Eligibility & Basis: The cess is levied under Section 8 of the GST (Compensation to
States) Act, 2017.

o Purpose: To provide compensation to the States for the loss of revenue resulting
from the implementation of GST.

o Charging: The cess is levied on:

 Intra-State supplies of goods or services or both (under CGST Act).

 Inter-State supplies of goods or services or both (under IGST Act).

o Rate: A cess of 15% or other rates is applied on top of the 40% GST on items like
aerated drinks, luxury cars, and tobacco products.

4. Explain the GST tax structure.

The GST tax structure in India is moving towards a rationalized regime (GST 2.0, w.e.f. 22nd
September 2025).

o GST Slabs: The system is being rationalized to focus on two common rates: 5% and
18%, along with a special 40% rate.

o Special Rates: Special concessional rates of 0.25% (for rough precious/semi-precious

stones) and 3% (for gold, silver, jewellery) are retained.

o Cess: A Cess of 15% or other rates is levied on few items like luxury cars and tobacco
products.

o Exclusions: Supply of alcoholic liquor for human consumption and specified

petroleum products (petroleum crude, motor spirit, etc.) are outside the current levy
of GST.

5. Describe the present GST Slabs.

The updated GST Slab rates in India, effective 22nd September 2025 (GST 2.0), are categorized as
follows:

Revised
Slab Description Examples of Applicability (w.e.f. 22/09/2025)
GST Rate

UHT Milk (moved from 5%), Life-saving/cancer drugs

0% Exempt / Nil 0% (moved from 12%), Health & Life Insurance (individual)
(moved from 18%)

Dairy items (butter, ghee), Processed foods, Soaps,

Merit / Basic
5% 5% shampoo, toothpaste (moved from 18%), Gyms/fitness
Goods & Services
centres (moved from 18%)

Cement (moved from 28%), Small/affordable vehicles,

18% Standard Rate 18% Consumer durables (fridge, AC), Restaurant dining
(premium/AC)

40% Sin / Luxury / 40% Pan masala, tobacco products, Carbonated drinks,
 Revised
Slab Description Examples of Applicability (w.e.f. 22/09/2025)
GST Rate

Demerit Goods Luxury cars, SUVs, Two-wheelers above 350cc

6. What are the functions of GST Council?

A GST Council has been constituted under Article 279A of the Constitution to make
recommendations to the Union and the States on:

o The taxes, cesses, and surcharges to be subsumed in the GST.

o The goods and services that may be subjected to, or exempted from the GST.

o Model GST Laws, principles of levy, and principles governing the place of supply.

o The threshold limit of turnover for exemption from GST.

o The rates including floor rates with bands of GST.

o Special rates to raise resources during any natural calamity or disaster.

o Special provisions for certain States (like J&K, Himachal Pradesh, and North-Eastern
States).

o Any other matter relating to the GST.

7. Discuss the concept of Composition levy.

The Composition Scheme is a simplified and convenient method for small taxpayers to reduce
compliance costs by paying tax at a fixed rate on their turnover.

o Eligibility: Aggregate turnover must generally be below Rs. 1.5 crore (Rs. 75 lakhs for
9 North-Eastern States). A separate scheme exists for suppliers of services or mixed
suppliers with a turnover up to Rs. 50 lakhs.

o Key Features:

 Fixed tax rate on total sales turnover.

 Summarized returns filed on a quarterly basis.

 Issues Bill of Supply instead of a tax invoice.

 Not required to maintain detailed records.

o Specified Rates:

 Manufacturers: 1.00% (0.5% CGST + 0.5% SGST).

 Restaurant services: 5% (2.5% CGST + 2.5% SGST).

 Other eligible suppliers: 1.00% (0.5% CGST + 0.5% SGST).

o Limitations:

 Not eligible for Input Tax Credit.

 Cannot engage in Inter-state business.

  Cannot charge tax from customers; must pay tax from own pocket.

 E-commerce transaction is outside the scope of the scheme.

8. Describe HSN and SAC under GST in India.

o Harmonized System of Nomenclature (HSN):

 Purpose: HSN is a six-digit uniform code used globally to classify goods,

identify the applicable tax rate, and determine trade quantity. Its structure
includes 21 sections, 99 chapters, about 1,244 headings, and 5,224
subheadings.

 Mandatory Digits in India:

 Up to Rs. 5 crores turnover: 4 Digits (mandatory for B2B Tax

invoices).

 More than Rs. 5 crores turnover: 6 Digits (mandatory for B2B and
B2C tax invoices).

 For import and export trade: 8 Digits.

o Services Accounting Code (SAC):

 Purpose: SAC is the uniform code used to classify services for recognition,
measurement, and taxation under GST.

 Structure: The first two digits (99) are the same for all services, followed by
two digits for the major nature of the service, and the final two digits for the
detailed nature of the service.

III - Essay Questions

1. Explain the mechanism of levy and collection of Cess, SGST, CGST, IGST and UTGST.

The levy and collection mechanism is built on the singular taxable event of supply.

Tax Basis of Levy Taxable Event Collection Mechanism

Intra-State Collected by the Government and

Section 9(1) of CGST supplies of paid by the taxable person
CGST/SGST/UTGST
Act goods or (supplier). Excludes alcoholic liquor
services for human consumption.

Levied on inter-State supplies,

Inter-State
excluding alcoholic liquor. IGST on
supplies of
IGST Section 5 of IGST Act imported goods is levied and
goods or
collected under Section 3 of the
services
Customs Tariff Act, 1975.

Cess Section 8 of GST Both Intra- Levied to provide compensation to

(Compensation to State and Inter- the States for revenue loss due to
States) Act, 2017 State supplies
 Tax Basis of Levy Taxable Event Collection Mechanism

of goods or
GST implementation.
services

The levy can also be reversed to the recipient under the Reverse Charge Mechanism or applied to
the Electronic Commerce Operator for notified services.

2. Define GST Council. Describe the composition, power and functions GST Council.

o Definition: The GST Council is a Constitutional Body established under Article 279A.
It is a quasi-legislative-cum-administrative body that acts as the key decision-
making authority for the implementation of GST.

o Composition:

 Chairperson: The Union Finance Minister.

 Member: The Union Minister of State in charge of Revenue or Finance.

 Members: The Minister in charge of Finance or Taxation (or other nominated

Minister) from each State Government.

o Decision-Making Power:

 Every decision must be taken by a majority of not less than 3/4th of the
weighted votes of the members present and voting.

 The Central Government’s vote has a weightage of 1/3rd of the total votes.

 The votes of all State Governments together have a weightage of 2/3rd of

the total votes.

 The Council also devises a mechanism for dispute resolution between the
Centre and States.

o Functions/Recommendations:

 Recommending the taxes, cesses, and surcharges to be subsumed in GST.

 Recommending goods and services to be subjected to, or exempted from,

GST.

 Recommending Model GST Laws and principles governing the place of

supply.

 Determining the threshold limit of turnover for exemption.

 Determining the rates (including floor rates and bands of GST).

 Recommending special rates to raise additional resources during a natural

calamity or disaster.

3. Write Notes on: a) Reverse Charge b) Composition Levy c) Revenue Neutral Rate

o a) Reverse Charge (RCM): A mechanism where the liability to pay GST is placed on
the recipient of the supply instead of the supplier, for specific notified categories of
 goods or services. This is done by notification under Section 9(3) of the CGST Act.
Cases include supplies from unregistered dealers to registered dealers, services via
an e-commerce operator, and imports.

o b) Composition Levy: An alternative and simplified scheme for small taxpayers with
an aggregate turnover limit of Rs. 1.5 crore (or Rs. 75 lakhs/Rs. 50 lakhs for specific
categories/states) . Tax is paid at a fixed, concessional rate (e.g., 1% for
manufacturers, 5% for restaurants). Key limitations are: the dealer is not eligible for
Input Tax Credit, cannot engage in inter-State business, and cannot charge tax from
the customer.

o c) Revenue Neutral Rate (RNR): The GST rate fixed by the government to ensure that
the gross revenue of the government remains the same after replacing multiple old
taxes with the unified GST. It ensures revenue stability despite changes in the tax law.
The RNR was 15.5% at the time of GST introduction, but has since been brought
down to 11.4%.

4. Explain the important provisions relating to GST council.

Important Provisions Relating to the GST Council

The GST Council is the apex policy-making body for the Goods and Services Tax in India. It is
constituted under Article 279A of the Constitution. The key provisions are:

1. Composition of the GST Council (Article 279A(2))

The Council consists of:

 Union Finance Minister – Chairperson

 Union Minister of State (Finance/Revenue) – Member

 State Finance Ministers (or any other nominated minister of each state) – Members

This structure ensures both Union and State representation.

2. Objectives of the GST Council

The main aim is to establish a harmonized national tax structure by:

 Making recommendations on GST-related matters

 Ensuring uniformity in tax rates and procedures across the country

3. Powers and Functions (Article 279A(4))

The GST Council recommends:

a. Taxes to be subsumed into GST

Which central/state taxes should be included or excluded.

b. GST Rates

 Rate structure

 Floor rates with bands

 Special rates for raising additional resources during natural calamities (e.g., GST
compensation cess)

c. Exemptions and Threshold Limits

 Exemption lists

 Threshold turnover for GST registration

d. Model GST laws

Including:

 Rules

 Procedures

 Place of supply rules

 Apportionment of IGST

e. Special provisions for certain states

Such as the North-Eastern states, J&K (earlier), and hill states.

4. Decision-Making Process (Article 279A(9))

Decisions of the Council require:

 75% majority of the weighted votes

 Voting Weightage:

o Centre: 1/3rd of total votes

o States: 2/3rd of total votes

Thus, neither the Centre nor the States can unilaterally impose decisions, ensuring cooperative
federalism.

5. Creation of a Dispute Resolution Mechanism (Article 279A(11))

The Council is empowered to establish a mechanism to resolve disputes:

 Between Centre and one or more states

 Between two or more states

 Between the Council and Centre/States

6. Meetings and Procedures

 The GST Council must meet at least once every quarter.

 It can regulate its own procedure.