GST History | GST India

Before we start discussing the evolution of GST India we first focus on the history of evolution of GST.

Introduction of the Value Added Tax (VAT) at the Central and the State level has been considered to be a major step – an important step forward – in the globe of indirect tax reforms in India. If the VAT is a major improvement over the pre-existing Central excise duty at the national level and the sales tax system at the State level, then the Goods and Services Tax (GST) will indeed be an additional important perfection – the next logical step – towards a widespread indirect tax reforms in the country.

World over in almost 150 countries there is GST or VAT, which means tax on goods and services. Under the GST scheme, no distinction is made between goods and services for levying of tax. In other words, goods and services attract the same rate of tax. GST is a multi-tier tax where ultimate burden of tax fall on the consumer of goods/ services. It is called as value added tax because at every stage, tax is being paid on the value addition. Under the GST scheme, a person who was liable to pay tax on his output, whether for provision of service or sale of goods, is entitled to get input tax credit (ITC) on the tax paid on its inputs.

Indirect Tax Reform

• 1974 Report of LK Jha Committee suggested VAT
• 1986 Introduction of a restricted VAT called MODVAT
• 1991 Report of the Chelliah Committee recommends VAT/GST and recommendations accepted by Government
• 1994 Introduction of Service Tax
• 1999 Formation of Empowered Committee on State VAT
• 2000 Implementation of uniform floor Sales tax rates Abolition of tax related incentives granted by States
• 2003 VAT implemented in Haryana in April 2003
• 2004 Significant progress towards CENVAT
• 2005-06 VAT implemented in 26 more states
• 2007 First GST stuffy released By Mr. P. Shome in January
• 2007 F.M. Announces for GST in budget Speech
• 2007 CST phase out starts in April 2007
• 2007 Joint Working Group formed and report submitted
• 2008 EC finalises the view on GST structure in April 2008

GST Evolution

• In 2003, the Kelkar Task Force on indirect tax had suggested a comprehensive Goods and Services Tax based on VAT principle.
• A proposal to introduce a National level Goods and Services Tax by April 1, 2010 was first mooted in the Budget Speech for the financial year 2006-07.
• Since the proposal involved reform/ restructuring of not only indirect taxes levied by the Centre but also the States, the responsibility of preparing a Design and Road Map for the implementation of Goods and Services Tax was assigned to the Empowered Committee of State Finance Ministers (EC).
• Based on inputs from Govt of India and States, the EC released its First Discussion Paper on Goods and Services Tax in India in November, 2009.
• In order to take the Goods and Services Tax related work further, a Joint Working Group consisting of officers from Central as well as State Government was constituted in September, 2009.
• In order to amend the Constitution to enable introduction of Goods and Services Tax, the Constitution (115th Amendment) Bill was introduced in the Lok Sabha in March 2011. As per the prescribed procedure, the Bill was referred to the Standing Committee on Finance of the Parliament for examination and report.
• Meanwhile, in pursuance of the decision taken in a meeting between the Union Finance Minister and the Empowered Committee of State Finance Ministers on 8th November, 2012, a ‘Committee on GST Design’, consisting of the officials of the Government of India, State Governments and the Empowered Committee was constituted.
• This Committee did a detailed discussion on GST design including the Constitution (115th) Amendment Bill and submitted its report in January, 2013. Based on this Report, the EC recommended certain changes in the Constitution Amendment Bill in their meeting at Bhubaneswar in January 2013.
• The Empowered Committee in the Bhubaneswar meeting also decided to constitute three committees of officers to discuss and report on various aspects of GST as follows:-
  • Committee on Place of Supply Rules and Revenue Neutral Rates;
  • Committee on dual control, threshold and exemptions;
  • Committee on IGST and GST on imports.
• The Parliamentary Standing Committee submitted its Report in August, 2013 to the Lok Sabha. The recommendations of the Empowered Committee and the recommendations of the Parliamentary Standing Committee were examined in the Ministry in consultation with the Legislative Department. Most of the recommendations made by the Empowered Committee and the Parliamentary Standing Committee were accepted and the draft Amendment Bill was suitably revised.
• The final draft Constitutional Amendment Bill incorporating the above stated changes were sent to the Empowered Committee for consideration in September 2013.
• The EC once again made certain recommendations on the Bill after its meeting in Shillong in November 2013. Certain recommendations of the Empowered Committee were incorporated in the draft Constitution (115th Amendment) Bill. The revised draft was sent for consideration of the Empowered Committee in March, 2014.
• The 115th Constitutional (Amendment) Bill, 2011, for the introduction of GST introduced in the Lok Sabha in March 2011 lapsed with the dissolution of the 15th Lok Sabha.
• In June 2014, the draft Constitution Amendment Bill was sent to the Empowered Committee after approval of the new Government.
• Based on a broad consensus reached with the Empowered Committee on the contours of the Bill, the Cabinet on 17.12.2014 approved the proposal for introduction of a Bill in the Parliament for amending the Constitution of India to facilitate the introduction of Goods and Services Tax in the country. The Bill was introduced in the Lok Sabha on 19.12.2014, and was passed by the Lok Sabha on 06.05.2015. It was then referred to the Select Committee of Rajya Sabha, which submitted its report on 22.07.2015
• GST Bill Passed in Rajya Sabha on 3rd August 2016 (03-08-2016)
• 29 March 2017 All 4 GST bills passed in Loksabha. The four bills passed by GST are Central GST (CGST), Integrated GST Bills (IGST), Union territory GST (UGST) and GST (Compensation to the State) Bill, 2017. There will be one tax for one commodity, ease of compliance for businesses, replacement of 17 indirect taxes, fall in logistics and inventory cost, etc. The Central GST (CGST) bill will merge all the indirect taxes like the service tax, excise duty, additional customs duty, special additional duty of customs, surcharges and cesses under one levy. The GST council has recommended a four-tier tax structure- 5, 12, 18, 28 percent.

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