The concept of Goods and Services Tax (GST) came to India with one main objective, which is to incorporate the idea of “one nation, one tax”. This meant that almost all the indirect taxes which were added to each product or service would get replaced by GST.
The introduction of GST has made it easier to do business as it welcomes the kind of transparency that is absent in the previous form of taxation where a number of taxes were added up. In addition to that, the past scenario was such that all products and services levied different rates in different states, GST’s policy of uniform taxation makes it in most ways, a better form.
GST also helps in achieving timely compliance. It was expected since its introduction that GST will decrease the burden taxpayers have to manage. Though the responses have been mixed, GST is considered to have made a positive impact on almost all of the nation’s sectors.
Composition Scheme under GST is a simple way in which taxpayers can bid farewell to formalities that have to be done otherwise. This can be availed by paying GST at a rate of turnover which is fixed. One condition that has to be satisfied is that the turnover of the taxpayer should be less than 1.5 crores.
Tobacco, pan masala or ice-cream manufacturers, inter-state suppliers, taxable non-residents and business owners that make use of e-commerce operators cannot avail the GST composition scheme.
When Vishwanath Pratap Singh was the Finance Minister back in 1986 and Rajiv Gandhi’s government was in power, attempts to reform the nation’s indirect tax regime began. Modified Value Added Tax (MODVAT) came into effect as a part of the efforts to achieve the same.
State-level Value Added Tax (VAT) additions and further discussions were carried out when P V Narasimha Rao was the Prime Minister and Dr. Manmohan Singh, his Finance Minister.
Prime Minister Atal Bihari Vajpayee was the one who waved a green flag to the idea of GST when it was proposed in 1999. His decision was supported by his economic advisory panel which consisted of notable members like IG Patel, Bimal Jalan and C Rangarajan who are former RBI governors.
This led to the decision that a committee has to be set up in order to effectively design a model to incorporate GST into the Indian economic scenario. Vajpayee announced Asim Dasgupta, Financial Minister of West Bengal as the head of the committee.
A task force was set up in 2002 whose main objective was to make tax reform recommendations. It was headed by Vijay Kelkar and was under the Vajpayee Government. The Kelkar committee reached the decision that it would be best to roll out GST as recommended by C. Rangarajan’s 12th Finance Commission.
The Later Stages
When the Congress-led UPA government came to power after the 2004 Lok Sabha elections, P Chidambaram became the Finance Minister who continued to work on the same path regarding GST. By 1 April 2010, he had successfully proposed a GST rollout.
The head of the GST committee, Asim Dasgupta resigned from his position in 2011 when CPI(M) lost in the West Bengal elections and Trinamool Congress came to power instead. Later, Dasgupta mentioned that 80 percent of the procedure was successfully completed by that time.
Again in 2014, there was a change in the government as the Bharatiya Janata Party-led NDA government won the 2014 Lok Sabha election. The GST Bill lapsed as a consequence of the dissolution of the 15th Lok Sabha.
Arun Jaitley, Finance Minister of the newly formed Modi government went on to introduce the GST bill in the Lok Sabha, seven months after the government was formed. Jaitley’s plan was to try and implement the bill before 1 April 2017 and he set the deadline accordingly in February 2015.
To pave way for the implementation of GST, Lok Sabha had to pass a Constitution Amendment in May 2016. There were many disagreements regarding some statements pertaining to taxation that were part of the Bill. It was demanded by the Opposition that the Bill must be sent back to the Select Committee of the Rajya Sabha for reviewing purposes.
The Amendment Bill was passed in 2016 and within 20 days, President Pranab Mukherjee approved it after ratification was done by18 states.
The Final Phase of Implementation
The Lok Sabha passed a few Bills on 29 March 2017, which were the Central Goods and Services Tax Bill 2017 (The CGST Bill), the Integrated Goods and Services Tax Bill 2017 (The IGST Bill), the Union Territory Goods and Services Tax Bill 2017 (The UTGST Bill), and the Goods and Services Tax Bill 2017 (The Compensation Bill).
All the rates, regulations and rules of GST were formed by the GST Council which comprises of the central as well as state finance ministers. These bills were passed by the Rajya Sabha on 6 April 2017. On 12 April 2017, were made into Acts. Later, each state passed its respective State Goods and Services Tax Bills.
On July 1, 2017, the Goods and Services Tax Act got launched at midnight and came into effect on the same day. On 7 July 2017, the GST act was passed by the Jammu and Kashmir state legislature which brought the whole nation under the umbrella of a single indirect taxation system.
Several modifications have been made to GST after it was launched. Mostly, this was regarding the revision of GST rates on many goods and services. The implementation of GST is seen as part of reshaping the whole Indian economy and most economists believe that in the long run, it will be highly beneficial in nature.
It is evident that GST was not an idea reached a quick decision. It took many years of planning and re-planning under several governments and leaders. One can say that it took India more than 30 years and innumerable criticisms to successfully implement the concept of a unified taxation system. Though the GST system is in action as of now, the journey is not over yet as the system will undergo several changes over time.