The history of customs excise and service tax is very old in India, when India was not even independent, these taxes are being imposed since then. but the service tax was first introduced in India in 1994 (imposed under the Finance Act 1994),which was presented by Dr. Manmohan Singh, due to services tax, today more than 50% of India’s GDP comes from services tax. but the framers of our constitution never even thought that services would be so important therefore, there is no mention of services in the constitution.
History of GST has begun in India started before two decades and was made successful in the year 2017. History of GST will help you under the benefits of Goods and Services Taxes and the advantages over other type of taxes.
The implementation of the Goods and Services Tax (GST) in India was a historical move, as it marked a significant indirect tax reform in the country.
The amalgamation of a large number of taxes (levied at a central and state level) into a single tax is expected to have big advantages. One of the most important benefit of the move is the mitigation of double taxation or the elimination of the cascading effect of taxation.
The initiative is now paving the way for a common national market. Indian goods are also expected to be more competitive in international and domestic markets post GST implementation. History of GST given in different stages, its transformation from other tax types, and more informative data on GST are given in the article.
History of GST Based on Country
Several countries have already established the Goods and Services Tax.
- France – The first country to implement GST in 1954 and many other European countries introduced GST in 1970-80s.
- China – Introduced VAT in 2016 to replace the Business Tax System that was already existing. GST is applied on selected goods.
- Japan – It introduced GST in the name of Consumption Tax in the year 1989.
- Malaysia – Introduced GST in 2015
- Australia – GST was introduced in 2000 with the rate of 10% and with the plans to increase it to 15%.
- Singapore – Introduced GST in the year 1994.
- Canada – GST was introduced in 1991 and has a dual model like India i.e. State GST and Central GST.
History of GST in India
· 2000: In India, the idea of adopting GST was first suggested by the Atal Bihari Vajpayee Government in 2000. The state finance ministers formed an Empowered Committee (EC) to create a structure for GST, based on their experience in designing State VAT. Representatives from the Centre and states were requested to examine various aspects of the GST proposal and create reports on the thresholds, exemptions, taxation of inter-state supplies, and taxation of services. The committee was headed by Asim Dasgupta, the finance minister of West Bengal. Dasgupta chaired the committee till 2011.
· 2004: A task force that was headed by Vijay L. Kelkar the advisor to the finance ministry, indicated that the existing tax structure had many issues that would be mitigated by the GST system.
· 2005: The finance minister, P. Chidambaram, said that the medium-to-long term goal of the government was to implement a uniform GST structure across the country, covering the whole production-distribution chain. This was discussed in the budget session for the financial year 2005-06.
February:- The finance minister set 1 April 2010 as the GST introduction date.
November:- Parthasarthy Shome, the advisor to P. Chidambaram, mentioned that states will have to prepare and make reforms for the upcoming GST regime.
· 2007: The 1 April 2010 deadline for GST implementation was retained in the union budget for 2007-08.
· 2008: At the union budget session for 2008-09, the finance minister confirmed that considerable progress was being made in the preparation of the roadmap for GST. The targeted timeline for the implementation was confirmed to be 1 April 2010.
July:- Pranab Mukherjee, the new finance minister of India, announced the basic skeleton of the GST system. The 1 April 2010 deadline was being followed then as well.
November:- The EC that was headed by Asim Dasgupta put forth the First Discussion Paper (FDP), describing the proposed GST regime. The paper was expected to start a debate that would generate further inputs from stakeholders.
· 2010:-The government introduced the mission-mode project that laid the foundation for GST. This project, with a budgetary outlay of Rs.1,133 crore, computerised commercial taxes in states. Following this, the implementation of GST was pushed by one year.
· 2011: The government led by the Congress party puts forth the Constitution (115th Amendment) Bill for the introduction of GST. Following protest by the opposition party, the Bill was sent to a standing committee for a detailed examination.
· 2012: The standing committee starts discussion on the Bill. Opposition parties raise concerns over the 279B clause that offers additional powers to the Centre over the GST dispute authority.
November :- P. Chidambaram and the finance ministers of states hold meetings and set the deadline for resolution of issues as 31 December 2012.
February:- The finance minister, during the budget session, announces that the government will provide Rs.9,000 crore as compensation to states. He also appeals to the state finance ministers to work in association with the government for the implementation of the indirect tax reform.
August 2013: The report created by the standing committee is submitted to the parliament. The panel approves the regulation with few amendments to the provisions for the tax structure and the mechanism of resolution.
October 2013: The state of Gujarat opposes the Bill, as it would have to bear a loss of Rs.14,000 crore per annum, owing to the destination-based taxation rule.
May:- The Constitution Amendment Bill lapses. This is the same year that Narendra Modi was voted into power at the Centre.
December:- India’s new finance minister, Arun Jaitley, submits the Constitution (122nd Amendment) Bill, 2014 in the parliament. The opposition demanded that the Bill be sent for discussion to the standing committee.
February:- Jaitley, in his budget speech, indicated that the government is looking to implement the GST system by 1 April 2016.
· May:- The Lok Sabha passes the Constitution Amendment Bill. Jaitley also announced that petroleum would be kept out of the ambit of GST for the time being.
· August:- The Bill is not passed in the Rajya Sabha. Jaitley mentions that the disruption had no specific cause.
ü Jaitley says that he is in agreement with the Congress’s demand for the GST rate not to be set above 18%. But he is not inclined to fix the rate at 18%. In the future if the Government, in an unforeseen emergency, is required to raise the tax rate, it would have to take the permission of the parliament. So, a fixed rate of tax is ruled out.
ü The Ministry of Finance releases the draft model law on GST to the public, expecting suggestions and views.
ü The Congress-led opposition finally agrees to the Government’s proposal on the four broad amendments to the Bill. The Bill was passed in the Rajya Sabha.
ü The Honourable President of India gives his consent for the Constitution Amendment Bill to become an Act.
· 2017: Four Bills related to GST become Act, following approval in the parliament and the President’s assent:
· Central GST Bill
· Integrated GST Bill
· Union Territory GST Bill
· GST (Compensation to States) Bill
The GST Council also finalised on the GST rates and GST rules. The Government declares that the GST Bill will be applicable from 1 July 2017, following a short delay that is attributed to legal issues.
Constitutional Amendment ACT
The first question that arises is why there was a need for constitutional amendment to implement the Goods and Services Tax? The simple answer to this is that the power given to the central and state governments was to be abolished first to collect different taxes. Therefore, it was necessary to amend the Constitution before bringing the Goods and Services Tax. And the tax which came under the Central List and State List was to be abolished and to bring the Goods and Services Tax under the Concurrent List, This would have been possible only when the Constitution was amended! This was 101th amendment of the Constitution which was done on 8 September 2016.
What is GSTN?
GSTN stands for Goods and Services Tax Network. It was introduced by the Government as a private company in 2013. It was registered under the Companies Act 1956, under Section 25. The main purpose of GSTN is to provide front-end services of registration, returns to taxpayers and payment. It also has the duty to develop back-end technical modules which will used by the states that had opted. Nearly 34 IT and Financial technology companies are chosen and named as GST Suvidha Providers to develop applications that will be accessed by taxpayers to interact with GSTN. These applications are very useful for the taxpayers as well as the government.
Equity Structure of GST Network
The GSTN’s authorised capital is ₹10 crore (US$1.4 million) in which initially the Central Government held 24.5 percent of shares while the state government held 24.5 percent. The remaining 51 percent were held by non-Government financial institutions, HDFC and HDFC Bank hold 20%, ICICI Bank holds 10%, NSE Strategic Investment holds 10% and LIC Housing Finance holds 11%.
With the introduction of GST, there are various benefits globally. The main motive is to maintain a uniform tax and develop the country’s products and introduce it globally. Some of the benefits of GST are listed below.
- GST creates common market nationally.
- Attracts foreign investment.
- Helps to have uniform taxation.
- Helps improve production and encourage to enter international market.
- Small retailers have nil tax or low tax.
- Consumers are benefited by purchasing from the small retailers.
GST implementation has brought a major change in the economy of India. It has widen up the markets of the goods and services due to uniformity of taxation throughout the country. Some of the features of GST are listed below.
- GST is applied on the supply of the goods unlike the earlier form of earlier taxation.
- GST is destination based structure of taxing.
- It is charged as CGST, SGST and IGST.