By Matters India Reporter
New Delhi: India launched a new taxation method at midnight of June 30 at the culmination of efforts that span over 17 tumultuous years.
The Goods and Services Tax (GST) overhauls the country’s convoluted indirect taxation system and unifying the US$2 trillion economy with 1.3 billion people into a single market.
Launching the GST in the central hall of parliament, President Pranab Mukherjee said GST will create a strong incentive for buyers to deal with honest and compliant sellers who pay their dues promptly. He hailed the GST introduction as a momentous event for the nation.
“There were apprehensions whether bringing over 1,000 items under the tax bracket would be possible. The council pleasantly surprised all of us by completing the task on time,” he said as the entire house erupted into thunderous applause.
The president, who had worked on the new bill when he was the federal finance minister, said he was always confident that the country will implement GST reform.
Prime Minister Narendra Modi hailed the GST as a transparent and fair system that prevents black money and corruption and promotes a new governance culture. “GST is a catalyst that will remove all imbalances in the economy and market,” he predicted.
Federal Finance Minister Arun Jaitley said the government has ensured that there was no unnecessary burden on the weaker sections. “New India will create one tax, one nation, one market,” he said and noted that the tax reform in India comes at a time when the world faced slow growth.
“GST is a journey will India will awake to endless possibilities. The old India was economically fragment. The new India will have one tax, one market. It will be an India where the Centre and the states work together towards the common goal of shared prosperity,” he added.
The GST replaces more than a dozen Central and State levies like factory-gate, excise duty, service tax and local sales tax or VAT. It is the nation’s biggest tax reform in the 70 years of Independence and will help modernize Asia’s third largest economy.
Here is a look at the timelines that shaped the ‘one nation, one tax’ system:
In February 1986, federal Finance Minister Vishwanath Pratap Singh proposed a major overhaul of the excise taxation structure in the budget for 1986-1987.
Four years later, Prime Minister Atal Bihari Vajpyee introduced the concept, set up a committee headed by then West Bengal Finance Minister Asim Dasgupta to design a GST model.
In2003, the Vajpayee government formed a task force under Vijay Kelkar to recommend tax reforms.
A year later, Vijay Kelkar, then advisor to the Finance Ministry, recommended the GST to replace the existing tax regime.
On February 28, 2006, the GST appeared in the federal Budget speech for the first time. Finance Minister P Chidambaram set an ambitious April 1, 2010 as deadline for the GST implementation. He said the Empowered Committee of Finance Ministers would prepare a road map for the GST.
In early 2008, the government constituted empowered Committee of State Finance Ministers constituted. On April 30 that year, it submitted its report titled ‘A Model and Roadmap Goods and Services Tax (GST) in India’ to the government.
On November 10, 2009, the committee submitted a discussion paper in the public domain on the GST welcoming a debate. Finance Minister Pranab Mukherjee announced the basic structure of GST as designed by Dasgupta committee; retained 2010 deadline. However, the BJP opposed GST basic structure.
In February 2010: Finance Ministry started mission-mode computerization of commercial taxes in the States, to lay the foundation for the GST rollout. Mukherjee deferred the GST to April 1, 2011.
On March 22, 2011, the UPA-II tabled 115th Constitution Amendment Bill in the Lok Sabha for bringing the GST. A week later, it was referred to the Parliamentary Standing Committee on Finance led by Yashwant Sinha.
In November 2012, Finance Minister P Chidambaram held meetings with State Finance Ministers; decided to resolve all issues by December 31, 2012 for the GST rollout.
In February 2013, Chidrambaram, declaring the UPA government’s resolve to introducing the GST, made provision for 90 billion rupees to compensate the States for the losses incurred because of the GST.
Six months later, the parliamentary standing committee submitted report to Parliament suggesting improvements on the GST. The Bill got ready for introduction in Parliament.
On October 2013, Gujarat Chief Minister Narendra Modi opposed the GST Bill, saying the State would incur losses worth 140 billion rupees every year due to GST.
In 2014, the bill cleared by the Standing Committee lapsed as the Lok Sabha was dissolved; paving way for the BJP-led NDA government to assume power.
On December 18, 2014: Cabinet approved the Constitution Amendment Bill (122nd) for the GST and new Finance Minister Arun Jaitley introduced the Constitution Amendment Bill for the GST following day.
On May 6, 2015: The Lok Sabha passed the Constitution Amendment Bill for the GST and on May 12, 2015, the Constitution Amendment Bill was introduced in the Rajya Sabha, which passed the bill on August 3, 2016.
On September 8, 2016 the Indian President signed the Bill and it became law. Four days later, the government formed the GST Council, decision-maker of all GST matters.
On November 3, 2016: The Council agreed on four rate slabs — 5%, 12%, 18%, and 28%. A month later, the council failed to reach consensus on key issues like dual control.
On December 12, 2016, set April 1, 2017 as the new roll out date.
On December 23, 2016, the council decided that the States would get compensated for 100 percent loss for 5 years and on January 16, 2017, the council agreed on contentious issues of dual control and rights of goods through high seas. The Finance Minister announced new GST deadline of July 1, 2017.