Evolution of GST in India

In India, the Atal Bihari Vajpayee government proposed the introduction of GST in 2000. It was because of the complex features of indirect tax prevalent in India. Based on their expertise creating State VAT, state finance ministers organised an Empowered Committee (EC) to create a structure for GST. Representatives from the federal government and state governments were asked to look at various parts of the GST plan and produce reports on thresholds, exemptions, interstate supply taxation, and service taxation. Asim Dasgupta, West Bengal’s finance minister, was in charge of the committee. This was the start of the history of GST in India.

In 2004, a task team led by Vijay L. Kelkar, the finance ministry’s advisor, concluded that the present features of indirect tax structure had numerous flaws that the GST system would address. Then, in February 2005, P. Chidambaram, the finance minister, stated that the government’s medium-to-long-term goal was to create a unified GST structure across the country, encompassing the entire production-distribution chain. This was considered at the budget session for the 2005-06 fiscal year. It was in February 2006 that the finance minister set 1 April 2010 as the GST introduction date. This was an important step in the history of GST in India. The union budget for 2007-08 kept the April 1, 2010 timeline for GST implementation. During the 2008-09 union budget session, the finance minister confirmed that significant work had been made in the preparation of the GST roadmap. The deadline for implementation has been confirmed as April 1, 2010.

The EC, led by Asim Dasgupta, released the First Discussion Paper (FDP) in November 2009, outlining the proposed GST regime. The document was supposed to spark a discussion that would result in more input from stakeholders. In March 2011, Congress-led government introduced the Constitution (115th Amendment) Bill, which called for the implementation of GST. Following the opposition party’s protest, the Bill was referred to a standing committee for further review.The standing committee started the discussion on the Bill in June 2012. The 279B clause, which gave the Center new powers over the GST dispute authority, was causing worry among opposition parties. Then in November of the same year, P. Chidambaram and other state finance ministers met and set a deadline of December 31, 2012 for issues to be resolved. This was another crucial point in the history of GST in India.

During the budget session of 2013-14, the finance minister encouraged state finance ministers to collaborate with the administration on the execution of the indirect tax reform. The standing committee’s report was presented to the parliament in August, the same year. The panel passed the regulation with a few changes to the features of indirect tax structure and resolution mechanism provisions.

The Constitution Amendment Bill expired in May 2014. This is the same year that Narendra Modi was elected Prime Minister of India. Arun Jaitley, India’s new finance minister, submitted the Constitution (122nd Amendment) Bill, 2014 to parliament in December 2014. The opposition urged that the Bill be referred to the standing committee for consideration. In his budget speech in February 2015, Jaitley stated that the government intends to implement the GST system by April 1, 2016 which was a major turning point in the history of GST in India. The Constitution Amendment Bill was then passed by the Lok Sabha in the months of May 2015. However, in August 2015, the Rajya Sabha did not pass the Bill. The disturbance, according to Jaitley, had no precise cause.

Then, in 2016, the Ministry of Finance made a draft GST model law available to the public, with the hope of receiving feedback and ideas.The opposition, led by the Congress, eventually agreed to the Government’s proposal on the Bill’s four broad modifications. The Rajya Sabha also approved the bill. The Honourable President of India gave his approval for the Constitution Amendment Bill to become an Act in September 2016. Following the enactment by the parliament and the President’s assent, four GST bills became law:

  • Central GST Bill
  • Integrated GST Bill
  • Union Territory GST Bill
  • GST (Compensation to States) Bill

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