GST: Why it took 17 long years for idea of 'One Nation One Tax' to become 'reality' in India

Prime Minister Narendra Modi on Wednesday congratulated the people of India over the passage of all four GST related bills in the Lok Sabha.  

The Prime Minister said,” it is a new year, new law and new India.” The passage of bills is seen as a major step towards implementation of Tax reform in the country from July 1.

The introduction of a unified goods and services tax (GST) across the nation is a path-breaking indirect tax reform since Independence. It has taken almost 17 years from the date of inception of the idea, formation of a task force, to the passage of the bills in Parliament.

It truly represents the democratic fabric of the country which entails change of hands in government regime and factors into account multi-party consensus-building exercise for formulating and an implementing a revolutionary reform of the magnitude of GST.

In 2000, Atal Bihari Vajpayee's Govt set up a committee which was handed the task of facilitating the states to switch from sales tax to the value-added tax (VAT) regime. On April 1, 2005, state-level VAT replaced sales tax in many states. Subsequently, the committee was mandated with facilitating states to switch to Goods & Service Tax (GST), in consultation with the Centre.

Even till the fag end of 2013, nearing the end of UPA’s tenure, along with BJP states, few Congress states and few other states with Non-Congress Non-BJP Governments, were opposed to certain provisions in the UPA’s version of GST.  The UPA could not negotiate with the states on the above demands and hence GST could not be brought under the UPA rule.

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GST circumcircles many state and central taxes. It thereby reduces the power of states to tax their citizens. Hence it was essential that all the states and the centre were on the same page at every stage of the GST Act. This did not happen during the UPA rule. Expectedly, states were worried that they would lose a big pie of their revenue by getting into GST.

So here is detailed look at the 17 year long journey of Goods and Services Tax via a timeline

2000 - GST discussions begin and the Empowered Committee for GST is set up

The Prime Minister of India, Atal Bihari Vajpayee, opens the discussion on the Goods and Services Tax (GST). He appoints Asim Dasgupta, the Finance Minister of West Bengal, to head the Empowered Committee, which will focus on creating a GST model and implement the required logistics and technology.

The Finance Minister, P. Chidambaram, sets April 1, 2010 as the deadline for implementing the GST in India. Since the proposed GST would combine service tax and excise tax, he increases the service tax from 10 percent to 12 percent

2004 - The need for a comprehensive GST is highlighted

The Kelkar Task Force, a tax reform commission chaired by Vijay L. Kelkar, identifies the problems in the current tax structure. 

FEB 2006 - The first deadline for implementing GST is set

The Finance Minister, P. Chidambaram, sets April 1, 2010 as the deadline for implementing the GST in India. 

Also Read: GST Bill gets Lok Sabha nod after 7-hour long debate in House | Who said what

Nov 2009  - The GST discussion paper is published online

The Empowered Committee, headed by Asim Dasgupta, publishes the first discussion paper on GST online to encourage discussions with stakeholders

FEB 2010 - Project launched to computerize commercial taxes

The Finance Minister, Pranab Mukherjee, postpones the GST deadline to April 1, 2011. The government sets up a Mission-mode Project to computerize commercial taxes that will serve as the foundation for GST. The budget for this project is set at 1,133 crores.

March 2011

Congress introduces the GST bill in Lok Sabha

The constitution amendment bill to implement GST is presented by Congress, the ruling party. The opposition party protests. The bill is passed on to the Standing Committee which will verify and examine the bill.

NOV 2012

Finance Ministers set deadline to resolve problems related to the transition to GST

The State Finance Ministers and Union Finance Ministers announce that they will resolve problems that may arise during the transition to GST by December 31, 2012.

FEB 2013

Budget committee provides 9,000-crore CST compensation to make way for the GST

Since GST is expected to replace CST, the finance minister announces that a 9,000-crore compensation will be provided to the states in order to make up for the CST revenue loss.

AUG 2013

Standing committee suggests amendments to the bill

After examining the GST bill, the standing committee submits its findings to the Parliament. The parliamentary panel approves the bill while recommending changes to the provision of tax structure and dispute resolution mechanism. The bill later lapses due to the dissolution of the 15th Lok Sabha.

DEC 2014

The GST bill was reintroduced to the Lok Sabha

BJP, the ruling party's Finance Minister, Arun Jaitley, introduces GST in the Parliament. Congress, the opposing party, insists that the bill should be sent for review by the Standing Committee again.

Also Read - GST: FM Arun Jaitley tables GST Bill in Lok Sabha, says it will benefit all; Congress terms it 'draconian'

MAY 2015

Lok Sabha passes the GST bill

The Lok Sabha passes the GST amendment bill with 352 votes.

AUG 2015

The GST bill is introduced in Rajya Sabha

AUG 2016

The GST Bill is passed in Rajya Sabha

SEPT 2016

16 States ratify the GST bill

SEPT 2016

The GST bill gets the presidential assent

The President of India, Pranab Mukherjee, gives his formal agreement to the GST constitutional amendment bill.

Madhya Pradesh to serve as the country's supply hub

The Finance Minister, Arun Jaitley, announces that centrally-located Madhya Pradesh will be the distribution centre for the country, in order to facilitate free flow of goods and services throughout India.

ALSO READ | GST: New indirect tax regime to remove inter-state barriers, stimulate exports, says Nirmala Sitharaman

NOV 2016

Four Tier GST Tax Structure Finalized

The GST council finalized the four tier tax structure. The new structure contains: a lower rate (5%), two standard rates (12% and 18%) and a higher rate (28%). An additional cess will be applied on demerit goods such as tobacco, pan, aerated drinks, etc.

NOV 2016

GST portal becomes live

The registration schedule for existing tax payers has been released and the registration windows for 8 states and union territories have opened.

2016: 

The GST Council headed by the Union finance minister is formed. The council decided on a four-slab rate GST structure of 5%, 12%, 18% and 28%. The so called “sin” or “demerit” products such as tobacco items, aerated drinks and luxury cars, would come under the highest tax slab and may attract a cess, which could increase the tax burden to 40%.

March 2017

The historic Goods and Services Tax (GST) regime on March 29 came a step closer to meet itsJuly 1 target of roll out with the Lok Sabha approving four supplementary legislations.

The Central GST Bill, 2017; The Integrated GST Bill, 2017; The GST (Compensation to States) Bill, 2017; and The Union Territory GST Bill, 2017 were passed after negation of a host of amendments moved by the opposition parties.

It has taken 17 long years for the landmark tax reform to get finally passed in the Parliament since its conceptualisation but the long wait is worth its weight in gold as the revolutionary reform aims to breach the discrepancies in the existing tax structures.