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Evolution of GST in India In 2000, the Vajpayee Government started discussion on GST by setting up an Empowered Committee, headed by...
Evolution of GST in India
In 2000, the Vajpayee Government started discussion on
GST by setting up an Empowered Committee, headed by Asim Dasgupta (West Bengal
Finance Minister) to design the GST model. Thereafter, the Task Force on
Implementation of the Fiscal Responsibility and Budget Management Act, 2003
(Chairman: Vijay Kelkar) recommended the removal of all inefficient and
distortionary taxes so that India obtains the efficiencies of a single national
tax, and suggested a comprehensive GST based on VAT principle. The idea of moving
towards a GST was proposed in 2005 by the then Union Finance Minister, P.
Chidambaram in his budget speech for the year 2005-06 where he observed that
the entire production-distribution chain should be covered by a goods and
services tax that encompasses both the Centre and the States. He reiterated his
idea in 2006-07 budget speech and proposed April 1, 2010 as the date for
introducing GST. Towards this objective, an Empowered Committee (EC) of State
Finance Ministers was to work with the Central Government to prepare a roadmap
for introduction of GST. The final version of the report of EC was presented in
the form of ‘A Model and Roadmap for Goods and Services Tax in India’ on April
30, 2008. After receiving comments on the report from Government of India and
concerned officials of the State Governments and taking into account their
recommendations, the EC released the First Discussion paper on Goods and
Services Tax in India on November 10, 2009 to obtain the inputs of industry,
trade bodies, and people at large. On 22nd March 2011, the Constitution (115th
Amendment) Bill was introduced in the Lok Sabha to operationalize the GST and
enable Centre and States to make laws for levying of GST. However, the Bill
lapsed with the dissolution of the 15th Lok Sabha. Thereafter, on 19th
December, 2014 the Constitution (122nd Amendment) Bill, 2014 was introduced in
the Lok Sabha to address various issues related to GST. It is noteworthy that
the introduction of GST required a Constitutional amendment as the Constitution
did not vest express power either in the Central Government or State Government
to levy tax on the ‘supply of goods and services’. While the Centre was
empowered to tax services and goods up to the production stage, the States had
the power to tax sale of goods. Since the GST regime requires goods and
services to be simultaneously taxed by both the Central and State Governments,
a Constitutional amendment was needed. The Constitution (122nd Amendment) Bill,
2014 was passed by the Lok Sabha on 6th May, 2015 after which the Rajya Sabha
passed the Bill with 9 amendments on 3rd August, 2016. The Lok Sabha then
passed the modified Bill on 8th August, 2016. After getting approval of half of
the States, it was sent to the President for his assent which was given on 8th
September, 2016. Thus the road to GST rollout was cleared and the process of
enactment was completed.
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