GST Council: How rate decisions are made and the agenda it keeps returning to
UPSC asks about the GST Council as an institution, from its Article and composition to its voting weight and the jurisprudence on whether its decisions bind.
The constitutional design
The Council was created by the 101st Constitutional Amendment Act, 2016, which inserted Article 279A. Three points anchor its design.
Chair. The Union Finance Minister chairs the Council. The Union Minister of State for Finance and every state Finance Minister are members.
Voting. Decisions require a three-fourths majority of votes present and voting. The Centre holds one-third of the voting weight, and the states together hold two-thirds.
Timeline. GST came into force on 1 July 2017. The Council held its first meeting in September 2016.
Source: GST Council
The standing agenda
Four items keep returning to the Council's table.
Rate rationalisation. The 56th Council meeting (3 September 2025) approved the two-slab structure: a 5% merit rate and an 18% standard rate, with a 40% de-merit rate for a few demerit and luxury goods. The 12% and 28% slabs were abolished, effective 22 September 2025. A Group of Ministers had examined the task for years before the reform.
Health and life insurance. The long-pending proposal to reduce or remove GST on premiums.
The compensation cess. States' guaranteed 14% annual revenue growth ended in June 2022, and the cess's future on sin and luxury goods remains contested.
Rate inversions. Textiles and footwear, where inputs are taxed higher than outputs. The Council corrects these periodically.
Does the Council's word bind?
The Supreme Court's Mohit Minerals ruling (2022) settled the question. The Council's recommendations are not binding. Parliament and the state legislatures hold equal legislative power over GST under Article 246A. The ruling keeps the Council a genuinely federal body rather than a superior authority. This is the single most exam-relevant judgment on the Council's design.
Prelims traps
| Statement | True or False |
|---|---|
| "The GST Council is chaired by the Prime Minister" | False. The Union Finance Minister chairs it |
| "States hold two-thirds of the Council's voting weight" | True |
| "The Council's recommendations are binding on states" | False. Mohit Minerals (2022) |
| "GST came into force in 2016" | False. The 101st Amendment passed in 2016; GST started 1 July 2017 |
| "GST still has four slabs" | False. Since 22 September 2025 the structure is 5% and 18%, with a 40% de-merit rate |
Part of: Constitutional and Parliamentary Developments
Read next: Economy, This Quarter: April to June 2026 · Fundamental rights vs DPSP
Source: GST Council; CBIC; Supreme Court judgment in Union of India v. Mohit Minerals (2022).