The GST Council is a unique experiment in cooperative federalism. Evaluate its role in moving GST from a compliance-heavy to a trust-based regime.

The GST Council under Article 279A brings the Union Finance Minister and State Finance Ministers together. A decision needs a three-fourths weighted vote, with the Centre holding one-third of the weight and the States two-thirds [1]. Its 57th meeting shows that this shared forum can also change how GST is administered. The shift is substantial, though not yet complete.

A unique federal experiment

• Pooled sovereignty: the Centre and the States give up separate indirect-tax powers and decide jointly. Neither side can carry a proposal alone [1].
• Sequenced reform: the 56th meeting simplified rates into 5% and 18%, plus a 40% demerit rate [2]. The 57th then turned to process reform in registration, returns, refunds and adjudication [3].

Role in building trust: the gains

• Less officer discretion: the Council recommended removing arrest provisions, raising the prosecution threshold from ₹1 crore to ₹5 crore and cutting the general penalty from ₹25,000 to ₹10,000 [3].
• Automation: the portal grants registration without officer intervention to low-risk applicants, and most changes to registration details are accepted automatically [3].
• Faster refunds: the system will provisionally sanction 90% of zero-rated and inverted-duty refund claims after assessing risk, which frees working capital for exporters and MSMEs [3].
• Fewer notices: better matching between return forms should reduce mismatch notices [3].

Limits: the risks

• Fake firms: a single drive since May 2023 found 29,273 bogus firms with suspected ITC evasion of ₹44,015 crore [4]. Automatic entry could make such fraud easier.
• Weak software: checking by hand also failed. The CAG found ₹185.28 crore of excess refunds in 522 cases [5]. But it also found that GSTN's refund module lacked adequate controls and risked paying refunds on unverified ITC [6]. If the software has these gaps, automation will repeat them in every claim.
• Reversibility: trust is a policy choice. If revenue falls, States that depend heavily on GST may push to restore tough enforcement.

Overall, the Council has shown that shared sovereignty can change both tax rates and the attitude of tax administration, from suspicion to data-based checking. The shift will last only if GSTN closes the gaps the CAG found, officers act on data-flagged cases and the Council publishes results such as refund times. Judged on these terms, the Council has largely succeeded, though the work is unfinished. It shows cooperative federalism working towards citizen-centric governance.