Taxation: History of Goods and Service Tax for India

by Madhav Joshi

Posted on April 10, 2020

Indian Parliament passed the Goods and Service Tax Act in April 2017. GST as a whole is placed on two subordinate parliamentary acts, (1) IGST: Integrated Goods and Services Tax Act (2) CGST: Central Goods and Services Tax Act. Proposed as the 122 nd Amendment Act in 2016, it also had the name of The Constitution Act 2016. Which became bill in 2017, as written in the starting.

Brief History for GST In India

As we all know, it was a historical move by the government. It amplifies the importance of indirect tax reforms in the country made the entire process of a bill becoming an act historical. Consolidating various taxes into one have more amount of pros than cons. If we look into history, it all started in the year 2000. Then prime minister Late Shri Atal Bihari Vajpayee proposed the GST Bill in parliament.

Here is the historical timeline of GST for India.

• State Finance Ministry to form an Empowered Committee to create a structure for Goods and Service Tax. Based on their experience in Value Added Tax.
• He prepared a team of representatives from the centre and state governments. Who was responsible to examine various aspects of the GST proposal. Creating informative and data supportive reports. Finance Minister of West Bengal Asim Dasgupta was given the responsibility to lead the team.
• In 2004, a different task force team lead by finance ministry advisor Vijay L Kelkar put forward many issues and bottlenecks that were present in the present taxation structure.
• P Chidambaram, the finance minister of that time proposed a long term goal of implementation of GST structure in the entire country.
• 2010 April 1 was supposed to be the GST Introduction Date.
• In 2009, Asim Dasgupta – head of representatives team formed by Atal Bihari Vajpayee presented 1 st report: First Discussion Paper. Opening the discussion to all the stakeholders for their inputs and comments.

The 2010’s Decade.

• February 2010, a mammoth 1,133 Crore Rs project of GST was introduced. Following this, the launch date of GST got postponed by 1 year.
• In 2011, Congress Led Government proposed the constitution bill (115 th Ammednement) for the introduction of GST. The opposition party had a lot of contradictions and hence, the entire proposal was sent to the standing committee seeking explanation and review.
• From 2012-2014, due to the proposal of the GST act being in standing committees review, the Government provided 9000 Crore Rupees of compensation to states. In 2013 as the standing committee provides the report, it gets a few updates in reforms and amendments from the panel. At that time, the Gujarat state opposed the bill as the state would bear a loss of 14,000 Crore Rupees per annum as per one of the amendments of the bill. Which was destination-based taxation rule.
  
  After the long discussion and refresh amendments, the constitution bill couldn’t become an act and got lapsed in 2014. The same year when the opposition of BJP came into the government as the ruling party. Narendra Modi becomes the prime minister.
• In 2014, Arun Jaitley’s finance minister of that time proposes the 122 nd Amendment of Constitution Bill. Similar to 2013, here again, opposition demands for the bill to get reviewed and examined by the standing committee.
• In Feb 2015, During the budget speech, Arun Jaitly announced the date of implementation of GST in April 2016.
• In March 2016, Finance Minister confirms the demand of opposition about the GST rate not exceeding the rate of 18%. Yet not keeping it fixed at 18.
• Government passed the draft model of the bill to the public in June 2016.
• Finally, in August 2016 Congress party agrees to the government’s proposal on four amendments to the bill. Rajya Sabha passes the bill.
• September 2016, The Constitution Amendment Bill becomes an Act.  With Honorable President giving consent.
• In 2017, 4 different bills get presidents consent and become an act.
  1. Central GST Bill
  2. Integrated GST Bill
  3. Union Territory GST Bill
  4. GST (Compensation to States) Bill

How does GST Act Look Like?

Goods and Service tax as per simple definition is an indirect tax used in India with respect to the supply of goods and services. A destination-based, multistage and comprehensive tax. GST eliminates indirect taxes like Value Added Tax, Central Excise Duty,  Sales Tax, Service Tax, etc. and consolidates everything into one. One Tax for One Nation. GST is a destination-related tax that hovers around goods and services in the country. Each stage of manufacturing to final consumption or start to end of any good/service is raised in this tax, Credit of each stage is collected and if taxes paid in an earlier stage is available as setoff. Furthermore, it focuses on taxing w.r.t. value addition and makes sure consumers who gets that final value will cope up the tax.