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What is the Timeline of GST Legislation in India?

The VAT regime was implemented on the first of April, 2005

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GST, Legislation, India
Here is how the GST bill was formulated and implemented.

It is quite a riveting debate when it comes to arguing whether the GST was implemented hastily or not, however, it is interesting to note that the GST bill took quite a long time to actually be part of the legislation. From formulating the policy to creating several reforms to bring the policy to life, from deciding rates to passing a complicated and dynamic CGST Act, the GST bill has been through a long and rough path.

The bill hit several snags and was put off by several governments, however, after a lot of consideration and amendments, the bill finally caused a tax revolution in India on the first of July, 2017. Here is how the GST bill was formulated and implemented.

GST, Legislation, India
The bill hit several snags and was put off by several governments, however, after a lot of consideration and amendments, the bill finally caused a tax revolution in India on the first of July, 2017.

The Timeline

  1. 1974- The L.K. Jha committee report suggests the adoption of the VAT system. The VAT regime was implemented on the first of April, 2005.

  2. 1986- Vishwanath Pratap, the then Finance Minister, propounds a major amendment to excise tax structure of the country, through the budget of 1986-87. MODVAT (Modified Value Added Tax) is implemented.

  1. 1991- VAT and GST are recommended by the Chelliah Committee.

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  1. July, 1994- Indian taxation system welcomes the Service Tax.

  2. 2000- Presiding Prime Minister, Atal Bihari Vajpayee pushes the concept of GST and forms a committee headed by then West Bengal Finance Minister Asim Dasgupta to look into the matter.

  3. 2003- Vijay Kelkar heads a task force to understand the reformations needed in the tax system, under the Vajpayee government. Haryana becomes the first state to implement VAT.

  1. 2004- CENVAT comes into existence for central level taxation. Kelkar recommends the GST reform.

GST, Legislation, India
The L.K. Jha committee report suggests the adoption of the VAT system. Pixabay
  1. 2006- Finance Minister P. Chidambaram mentions GST in the budget speech, sets a deadline of April 1, 2010 for its implementation.

  2. 2008- Empowered Committee consisting of State Finance Ministers joins hands with the Central Government to test out several models of GST and assess which one would be best for India.

  3. April, 2008- A report titled ‘A Model and Roadmap to Goods and Services Tax (GST) in India’ is handed over to the government by the EC.

  1. 2009- The GST paper is made public, open for opposing opinions. Finance Minister Pranab Mukherjee declares the basic skeletal of the GST for the Indian tax system. The structure is opposed by the BJP.

 

  1. 2010- Commercial taxes were starting to get computerised, setting a base for GST implementation. Pranab Mukherjee pushes the date of implemented to April 2011.

  1. 2011- 115th Constitution Amendment Bill introduced in the Parliament by the UPA government to introduce GST.

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  1. 2012- P. Chidambaram heads a meeting of state finance ministers, plans on creating a suitable bill by thirty-first December, 2012.

  1. 2013- A report is submitted by the Parliamentary Standing Committee, asking to improve the GST Bill. Then Chief Minister of Gujarat Narendra Modi rejects the bill claiming that it would put Gujarat at a loss.

  1. 2014- Due to a change in government, GST Bill dissolves as BJP takes over the Parliament.

  1. December, 2014- The 122nd Constitution Amendment Bill is floored in the Lok Sabha by the then Finance Minister Arun Jaitley. Opposition remains skeptical of the Bill.

  1. February, 2015- April 1, 2016 is proposed as a deadline for the implementation of the GST regime.

  1. May, 2015- GST Constitutional Bill is passed in the Lok Sabha and presented in the Rajya Sabha. Congress proposes a cap of 18% on the GST rate.

  1. August, 2015- The Bill fails in Rajya Sabha as the opposition remained strong in the house and out-votes against the implementation of the Bill.

  1. August, 2016- Congress agrees to back BJP to pass the Constitutional Amendment Bill. The Bill passed in the Rajya Sabha with two-thirds majority.

  1. September, 2016- The Bill is accepted by sixteen states. President Pranab Mukherjee accepts the Bill. The GST Council is agreed upon by the Union Cabinet.

  1. January, 2017- Deadline for the implementation is set for first July, 2017 by Arun Jaitley.

  1. February, 2017- A rough compensation bill is formulated by the GST Council.

  1. March, 2017- CGST, IGST, UTGST and Compensations bills are approved by the Cabinet. All of them are introduced in the Parliament, both houses pass all the crucial GST Bills.

  1. May, 2017- The four categories of taxes proposed by the Council have been crammed with over 1,200 goods, each category having a tax rate of its own. A cess is created to compensate states for luxury goods.

  1. June, 2017- Except for Jammu and Kashmir, every state passes the State GST Bill. Mamta Banerjee, Congress, and the Leftist parties refuse to roll out the bill at midnight.

  1. July, 2017- The GST Bill is implemented countrywide.

Concluding Remarks

It is quite fascinating to see and understand how a financial bill, or any bill for that matter, is passed in the Parliament and implemented in the country. It is definitely no wonder that the GST Bill was one of the biggest tax reforms in India.

Next Story

What Are the Benefits of Introducing GST in India?

GST has enabled small businesses to simplify their tax return by introducing the Composition Scheme under GST

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GST
The GST created a unified tax structure and provided businesses with certainty and transparency. 

The Goods and Services Tax is a consumption tax that has changed the way India does indirect taxation. The GST was under consideration for a very long time. The tax structure which India had before the advent of the GST was quite complicated and extremely convoluted.

There were many taxes which were administered by a myriad of governing bodies, some going down to the city level. This created a lot of problems for businesses and consumers alike. Not only did businesses have to employ people to figure out and compute the tax, but they also had to figure out who to pay it to.

GST
Simplification of small business was a priority which is why, for example, the Composition Scheme under GST was introduced. This scheme helps small businesses reduce red tape and file more straightforward tax returns.

This created a drag on the economy and took money out of productive uses. All of this changed with the introduction of the GST tax. The GST created a unified tax structure and provided businesses with certainty and transparency.

Simplification of small business was a priority which is why, for example, the Composition Scheme under GST was introduced. This scheme helps small businesses reduce red tape and file more straightforward tax returns.

Some of the main benefits of the Goods and Services Tax system are:

1. Simplification of the Tax Code:

The pre-GST era was characterized by a complex and murky tax structure in which companies had to navigate as best they could. There were many layers of taxes such as VAT, Cess, Central Excise Duty as well as local taxes at the city level, which needed to be paid when a product or service was delivered to the customer.

This has now been simplified with the introduction of the GST. Now companies need to keep track of one single tax. They can now file taxes with a single entity in a secure manner.

2. Ease of Doing Business:

The implementation of GST has brought India up the ease of doing business rankings. Having a convoluted and complex tax structure with the manual filing of taxes creates a massive volume of paperwork.

Not only was there a lot of paperwork, but offline tax filing also created scope for corruption. GST has changed all of that with the introduction of one single tax under a single tax authority. It is now a much more streamlined process which is easier for businesses to navigate.

It is also essential to have a streamlined tax process for attracting foreign investors, so that has helped with Foreign Direct Investment in India.

3. Double Taxation:

Pre-GST, there was a problem of cascading taxation, wherein taxes would be piled on top of each other, leading to double taxation. A lot of the time, businesses and consumers had to pay a tax on top of another tax.

This was because there was no way for businesses to claim an input tax credit for every step of the way. GST has changed that entirely by introducing a system where each every step of production of a product is recorded, so taxes are only added incrementally, and double taxation is avoided.

Also, small businesses faced a daunting task of navigating the complex tax system, and the GST has enabled small businesses to simplify their tax return by introducing the Composition Scheme under GST. This has been a significant benefit of GST.

4. Tax Compliance:

Tax compliance has always been an issue in India, under the older tax system where tax filing was mostly done manually, there was a lot of tax evasion and under-invoicing.

Since there was very little that the government could do to track the production of goods. With the advent of the GST, the way the system is designed, it is much easier to track the production of products through the various invoices uploaded by businesses.

The Input Tax Credit system also incentivizes companies to report the number of goods and services used so that they can claim Input Tax Credit. This has been a positive development for tax collection.

5. Increased Tax Collections:

With increasing tax compliance, there is a potential for increasing tax collections. With the increased tax collection, the government can spend more money on important public services like health, safety, etc.

This is also one of the most important benefits of having a tax system that allows higher rates of compliance.

GST
The Goods and Services Tax is a consumption tax that has changed the way India does indirect taxation. The GST was under consideration for a very long time. Pixabay

6. Foreign Investment:

In a globalized world, it is vital to attract capital from around the world. Top companies who want to invest in a country look for stable and transparent tax regimes so that they have regulatory certainty.

The older tax structure was haphazard and under the authority of multiple tax collecting bodies. This created a problem for foreign firms who wanted to invest in the country but had a tough time negotiating the tax landscape of the country.

The GST has completely changed that. The GST is under one central authority and uses the GSTN (Goods and Services Tax Network), which is the information technology service which underpins the whole system.

The GST system is also much more nimble and able to respond to the needs of the market because it is under one single tax authority, the GST Council. This is also an excellent benefit for the country as it doesn’t take a lot of consultation to change the rules in case of adverse market conditions.

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In conclusion, there are several benefits to the country as a whole with the implementation of the GST system. Small business is the driving force of the Indian economy, providing a lot of employment. Things like the Composition Scheme under GST has helped simplify the tax filing for small business while maintaining compliance.