Core Functions of the GST Council
The council’s role is advisory, but its recommendations shape almost every major GST lever; that’s the simplest way to describe how the GST Council works in practice.
Recommend GST Coverage: Tax and Exempt
The GST council recommends which goods and services should be brought under GST and which should be exempted. This function directly impacts consumer prices, sector competitiveness, and government revenues, so it often involves balancing inflation concerns with fiscal needs. It also helps maintain a broadly uniform tax base across states, avoiding a patchwork of exemptions that can complicate compliance.
Recommend Model GST Laws
The GST Council recommends model GST laws to guide the Union and States in framing and aligning their GST legislation and rules. This is crucial because GST requires consistent definitions, procedures, and compliance standards to function effectively across India. In practice, it supports administrative uniformity and reduces interpretive disputes for businesses operating in multiple states.
Place of Supply Principles
The GST Council recommends principles governing “place of supply,” which determine whether a transaction is treated as intra-state or inter-state supply. These principles determine whether CGST+SGST or IGST applies, and they are central to GST’s operational design and revenue sharing. Clear place-of-supply rules also reduce classification disputes and facilitate cross-border (interstate) trade.
Threshold Limits
The GST Council recommends threshold limits that decide when GST registration and compliance become mandatory for businesses. This matters because thresholds influence the ease of doing business for small enterprises and also affect the tax base and formalisation. By revisiting thresholds periodically, the council can respond to evolving compliance capacity and economic conditions.
GST Rates: Bands and Floor Rates
The GST Council recommends GST rates, including “floor rates with bands,” which help keep the tax structure broadly consistent across India. Rate decisions are among the most visible outcomes of the GST Council's work, as they influence prices and demand across sectors. Over time, the council has also discussed rationalisation efforts to reduce complexity and disputes.
