The Story from the Past: History of Goods and Service Tax

While the enlightened minds of the country are busy advocating how well the idea of GST is going to support the financial pillars of the country, a huge number of civilians are till date striving to grasp the basic flow of the concept and its presumptive positive effect in their lives. In a country that practices democracy, every thought generated and every idea implemented ought to find favour of the aam janta. Hence, it is essential for every citizen to be well versed with the concept of GST from its inception. From the time of GST conceptualisation to GST implementation, let us find out the entire story behind GST India step by step.

Brief History of Goods and Service Tax

Although, it was in 2000 that Vajpayee Government set up an Empowered Committee to discuss GST, the idea however, concerning its implementation was first announced by the then Union Finance Minister, Shri P. Chidambaram in the Central Budget (2007-2008). The announcement led to further detailed discussions on the report by the Empowered Committee of State Finance Ministers that was set up as a Joint Working Group on May 10, 2007. The intensive discussions and written observations within the Committee and the experts led to certain modifications. The First Discussion Paper by the Empowered Committee on Goods and Service Tax was released on November 10th, 2009.

So, what did the First Discussion Paper hold? Well, it proposed the dual GST model for the country. This model consisted of two components viz. the Central GST to be levied and collected by the Centre and the State GST to be levied and collected by the respective States.

As the GST continued qualifying stages of observations, the Joint Working Group got trifurcated into three Sub Working Groups who would work separately on drafting legislations required for GST, process/ forms to be followed in GST, regime and infrastructure development needed for smooth functioning of proposed GST India. Besides, an Empowered Group for development of IT Systems required for Goods and Service Tax regime was also set up under the chairmanship of Dr. Nandan Nilekani.

Constitutional Amendment

The Constitution provided for Centre to tax the services and goods up till the production stage and  for State to tax the sale of goods. However, the Centre and the State did not have the power to levy tax on ‘supply of goods and services’.

Hence, the 115th Amendment Bill  was tabled before the Parliament on March 22, 2011 to give concurrent taxing powers to both the Union and the State. With the introduction of 122nd Constitution Amendment Bill, the former was replaced. It received assent from the President, Pranab Mukherjee on September 8, 2016. And now, GST is expected to roll out on 1 July.

It has taken quite a bit of time for GST to finally receive the go-ahead from the authority. And with GST implementation, it is hoped that the tax burden of the ordinary citizen will be reduced and rampant tax evasion will be curbed.

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