GST in India: A Journey of Economic Reforms 

Today we are going to discuss the stages through which the GST has come in to picture. The journey of GST in India was not simple unlike to other laws. There are many factors which includes political interfere, administrative control and information technology infrastructure for implementation of GST.

The long awaited economic reform the ‘Goods and Services Tax Law’ is now going to become reality as Rajya Sabha of Indian Parliament has passed the Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014. Now it is expected to that Government will put the GST Law in coming budget session February, 2017.

“Goods and Services Tax” would be a comprehensive Indirect Tax on manufacture, sale and consumption of goods and services throughout India, to replace taxes levied by the central and state governments. Goods and Services Tax would be levied and collected at each stage of sale or purchase of goods or services based on the input tax credit method. This method allows GST-registered businesses to claim input tax credit to the value of GST they paid on purchase of goods or services as part of their normal commercial activity. Exports would be zero-rated and imports would be levied the same taxes as domestic goods and services adhering to the destination principle.

The Bill seeks to amend the Constitution to introduce a goods and services tax (GST) which will include various Central indirect taxes, including the Central Excise Duty, Countervailing Duty, Service Tax, etc. It also subsumes State value added tax (VAT), Octroi and entry tax, luxury tax, etc. From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 18%, free movement of goods from one state to another without stopping at state borders for hours for payment of state tax or entry tax and reduction in paperwork to a large extent. 

Year wise Journey of GST for Economic Reforms  

Year Action Taken
2000 The Atal Bihari Vajpayee led NDA Government set up an empowered committee, headed by then West Bengal Finance Minister Asim Dasgupta, which was given the task of streamlining the GST model to be adopted as well as putting in place the required back end infrastructure that would be needed for its implementation. 
2004 The Kelkar Task Force on the implementation of the FRBM Act, 2003 had then pointed out that although the indirect tax policy in India has been steadily progressing in the direction of VAT principle since 1986, the existing system of taxation of goods and services still suffers from many problems. The task force suggested a comprehensive Goods and Services Tax (GST) based on VAT principle.
2006 In his budget speech, then finance minister P Chidambaram announced the proposal to shift to a national taxation system. “It is my sense that there is a large consensus that the country should move towards a national level Goods and Services Tax (GST) that should be shared between the Centre and the States. I propose that we set April 1, 2010 as the date for introducing GST.” 
2007 An empowered committee of state finance ministers began drawing up a road map on the legislation and in November that year, a joint working group submitted its report to the empowered committee. 
2008 In April, the EC finalised its report titled “A Model and Road map for Goods and Services Tax (GST) in India” containing broad recommendations about the structure and design of GST. In response to the report, the Department of Revenue made some suggestions to be incorporated in the design and structure of proposed GST. 
2009 In November, the EC, based on inputs from the Union government and states, released its First Discussion Paper on GST in India with the objective of generating a debate and obtaining inputs from all stakeholders. 
2010 In his budget speech, then finance minister Pranab Mukherjee said the new legislation would come into effect from April 1, 2011. “I am confident that the government will be in a position to implement DTC (direct tax code) from April 1, 2011.” However, the UPA government failed to implement the new tax reform. 
2011 In March, the Constitution 115th Amendment bill was introduced in Lok Sabha to levy GST on all goods and services except those specified. The bill was sent to the Standing Committee. 
2013 The Standing Committee submitted its report to Parliament. However, the UPA government failed to win the support of BJP-ruled states including Gujarat forcing the legislation to lapse with the dissolution of the 15th Lok Sabha. 
2014 The Constitution (122nd Amendment) Bill, 2014 was introduced in the Lok Sabha by Finance Minister Arun Jaitley on 19 December 2014, and passed by the House on 6 May 2015
2015 Finance Minister Arun Jaitley announced in his budget speech 28-02-2016 that the government is keen on implementing the GST by April 1, 2016 and hoped that the bill will be cleared by Parliament. In the on-going Monsoon Session, the government is hopeful of passing the bill in Rajya Sabha, where it lacks a majority, with the support of regional parties.
2016 The bill was passed by the Rajya Sabha on 3 August 2016, and the amended bill was passed by the Lok Sabha on 8 August 2016.

The Goods and Service Tax is being rated as the most reformative measure proposed in the field of Indirect Taxation in the history of India. It is expectation from new system of Indirect Taxation that it would remove cascading effect of taxes resulting in cutting in cost of industrial products. The cumulative effect of GST would clear the path for FDI in our country which will boost the ‘Make In India’ program for development of India.

This is all about journey of GST in India. So let us know what is your view on GST road map from starting to present position. Comment below and express your view…………. 

  • Whether this reform is on time or we are late.
  • Whether expectation of assessee and Government will fulfill.
  • Whether still political interfere would cause in proper implementation of GST.

Comment below and express your view

[Disclaimer: The view expressed in above article are of Editorial Team of TaxIndiaUpdates and should not be treated as legal advice in any manner]