A little history of GST in India

As you have read the topic, this article is gonna about GST in India. Many of us already know about GST, that stands for Goods and Services Tax. Many of us will also be knowing that France was the first country to implement GST in India 1954. Yes, 46 years ago when India started to plan about implementation of GST. Many countries imposed GST in 1970s-80s (for example:- Germany, UK, Italy, South Korea, Japan, Canada and Australia). Russia imposed it in 1991 and China in 1994 (in some parts). 

Appearance of GST in India

So that was a brief history of GST on the international level, now let’s talk about its appearance in India. In 2008, Atal Bihari Vajpayee government first suggested the idea of adapting GST and an Empowered Committee was formed by the State Finance minister to create a structure for GST based on their experience in designing the state VAT.

So here question arises that what is VAT first!!

As many of us know that VAT stands for Value Added Tax, but how much of us do know how does it work! Let me try to explain this to you, VAT is a consumption tax that is levied on a product repeatedly at every point of sale at which value has been added. It is commonly expressed as a percentage of the total cost.

Limitations of a VAT 

Some of the very basic limitations and disadvantages of VAT are :-

1. It was regressive(continuous) in nature.
2. As VAT was based on full billing system, VAT implementation was expensive.
3. It was not a simple task to calculate VAT at every stage and not a very easy task.
4. All purchase and sales records was maintained which cause increase in compliance.

There are more drawbacks in application of VAT and you will agree too why had we needed to reform our taxation system. Back to topic, we were discussing about Empowered Committee(EC), the committee was headed by Asim Das Gupta who was the finance minister of West Bengal. Representatives from state and centre were requested to examine various aspects of GST proposal and create reports on the thresholds, exemptions, and taxation of services. Asim ji chaired the committee till 2011.

 GST in India budget session 

In February 2005, the Finance minister P Chidambaram said that the medium to long term goal of government was to implement a uniform GST structure across the country and was covering the whole production distribution chain.

In financial year 2005-06 this was discussed in budget session.

In February 2006, The Finance minister set 1st April 2010 as the GST introduction date. In November 2006 Parthasarthy Shome, the advisor to P Chidambaram mentioned that States will have to prepare and make reforms for upcoming GST regime.

In July 2009, the new Finance minister Pranab Mukherjee announced, the basic skeleton of the GST system. The deadline i.e, 1st April 2010 was being followed as well.

In February 2010, the Government introduced the mission mode project that laid the foundation for GST. This project with budgetary outlay of 1,133 crore computerized commercial taxes in States. Following this implementation of GST was pushed by 1 year.

In March 2011, the government led by the Congress party puts forth the constitution (115th amendment) Bill for the introduction of GST in India. Following protest by the opposition party, the Bill was sent to standing committee for a detailed examination.

The standing committee in June 2012 starts discussion on the Bill, opposition parties raise concerns over the 279B clause that offers additional powers to the centre over the GST dispute authority.

P Chidambaram and the Finance minister in November 2012 hold meetings and set the deadline for resolution on issues 31st December 2012.

In August 2013, the report created by standing committee is submitted to the parliament the panel approves the regulation with few amendments to the provision for tax structure and the mechanism of resolution.

In October 2013, the state of Gujarat opposes the bill as it would have to bear a loss of 14,000 crore per annum, owing to the destination based taxation rule.

In May 2014, The Constitution amendment Bill lapses. This was the same year when Narendra Modi was voted into power at the centre.

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In February 2015, Arun Jaitley in his budget speech indicated that government is looking to implement the GST system by 1st April 2016.

In May 2015, The Lok Sabha passes the constitution amendment Bill. Arun Jaitley also announced that petroleum would be kept out of the Ambit of GST for the time being.

But in August 2015, the Bill was not passed in The Rajya Sabha. Jaitley mentioned that the disruption had no specific cause.

In June 2016, the Ministry of Finance releases the draft model law on GST to the public expecting suggestions and views.

In August 2016, the Congress led opposition finally agrees to the government proposal on the four broad amendments to the bill. 

The bill was passed in rajya sabha in September 2016, the Honorable President of India gave his consent for the constitution amendment Bill to became an Act.

In 2017, four bills related to GST became Act:-

1. Central GST Bill. 
2. Integrated GST Bill. 
3. Union Territory GST Bill. 
4. GST (compensation to States) Bill.

The government declared GST will be applicable from 1st July 2017

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This Article has been written by Amit Kumar.

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