Goods and Services Tax (GST) is a major tax reform that has streamlined the Indian taxation system. Introduced with the aim of simplifying the indirect tax structure, GST has had a significant impact on businesses, consumers, and the economy at large. The implementation of GST replaced a complex tax regime with a unified system that incorporates multiple indirect taxes under one umbrella.
The introduction of GST has been a long journey involving numerous architects, key figures, and extensive planning to ensure smooth implementation. In this article, we will explore the evolution of GST in India, the key figures behind its formation, the architects of this monumental change, and some interesting facts about GST. If you are a new business, you can get started by learning about the process of GST Registration to ensure tax compliance from day one.
Who is the father of GST in India?
The title "Father of GST" in India is often attributed to Dr. Vijay Kelkar, who played an instrumental role in conceptualising the Goods and Services Tax. As the Chairman of the 13th Finance Commission, Dr. Kelkar advocated for a simplified tax structure to eliminate cascading taxes, which had become a burden for both businesses and consumers.
While Dr. Kelkar is widely credited with presenting the idea and advocating for the GST system, it was Atal Bihari Vajpayee, the then Prime Minister of India, who is often recognised for initiating the GST movement in India. During Vajpayee's tenure, a committee was formed to study the feasibility of implementing GST, marking the first step towards its eventual adoption. His foresight and leadership laid the foundation for what would become one of the largest tax reforms in the country. The GST itself is a dual-tax model, designed to collect tax simultaneously at the central and state levels, making the tax structure more efficient.
GST journey in India
The journey of Goods and Services Tax (GST) in India has been a long one, filled with deliberations and reforms aimed at simplifying the tax structure. Before GST, India had a complex tax system with multiple indirect taxes levied by both the central and state governments. GST was introduced to unify and streamline this system, benefiting both businesses and consumers.
- Early 2000s: The idea of a unified tax system was proposed due to inefficiencies in the existing tax structure with multiple taxes levied by both central and state governments
- 2000: Formation of an Empowered Committee of State Finance Ministers under Dr. Asim Dasgupta to draft the blueprint for GST. This committee worked on gaining consensus on the tax structure, rate slabs, and constitutional amendments
- 2014: The GST Bill was introduced in Parliament, marking a significant step towards GST implementation after approval from the Cabinet
- 2016: The GST Constitutional Amendment Act was passed, setting the stage for the GST Council to oversee the implementation process
- 1st July 2017: GST was officially implemented, replacing multiple indirect taxes like VAT, excise duty, and service tax with a single unified tax
- GST council: Played a vital role in finalising tax rates and ensuring smooth implementation across states. It continues to make decisions on GST-related matters
The successful implementation of GST in 2017 marked a major turning point in India’s tax system, improving efficiency and simplifying business processes. If you are unsure of how much GST to apply on your products or services, using a GST Calculator can help you compute it accurately and stay compliant.
The architects of India’s GST
India's Goods and Services Tax (GST) was the result of years of hard work, collaboration, and strategic vision from several influential figures. The architects of India’s GST included economists, tax experts, and political leaders who worked together to navigate the complexities of implementing a tax reform of such magnitude.
- Dr. Vijay Kelkar: Known for his vision of simplifying India’s tax structure, his ideas laid the groundwork for the introduction of GST
- Atal Bihari Vajpayee: As Prime Minister, Vajpayee’s leadership helped set the stage for the formation of a unified tax system
- Arun Jaitley: The former Finance Minister of India, Jaitley is often hailed as one of the key architects behind GST’s successful implementation. His consistent engagement with stakeholders, as well as his efforts to build political and administrative consensus, played a crucial role in overcoming regional and political challenges
- Dr. Hasmukh Adhia: As the former Secretary of the Department of Revenue, Dr. Adhia was instrumental in formulating the framework and managing the rollout of GST, helping businesses transition smoothly during its initial phases
- GSTN (Goods and Services Tax Network): GSTN played a pivotal role in developing the IT infrastructure necessary for GST’s success. The network enabled businesses and tax professionals to file returns, check compliance, and access GST-related services smoothly
These key figures and institutions, through their expertise and leadership, were fundamental in shaping and driving forward India’s GST reform.
Interesting facts about GST
The Goods and Services Tax (GST) is one of the most significant tax reforms in India’s history, bringing about several structural changes to the tax system. Here are some interesting facts about GST that shed light on its complexity and impact:
- Dual GST structure: India’s GST system operates on a dual GST structure, meaning that both the central and state governments levy taxes on goods and services. This system allows the Centre to collect Central GST (CGST) and the states to collect State GST (SGST) on intra-state sales, while Integrated GST (IGST) applies to inter-state sales
- CGST and SGST: CGST and SGST are both part of this dual GST system. CGST is collected by the central government on intra-state transactions, while SGST is collected by the respective state government
- GST council: The GST council plays a pivotal role in the implementation and modification of GST rules and tax rates. It comprises the Union Finance Minister, State Finance Ministers, and other key officials. The Council is responsible for harmonising tax structures across states and revising tax rates based on economic conditions
- GSTN (Goods and Services Tax Network): The GSTN is an essential part of the tax reform, providing the IT infrastructure needed to process GST-related returns and payments. The system allows businesses and taxpayers to interact with the GST system efficiently. To ensure proper categorisation and filing, each GSTIN begins with a GST State Code, which indicates the specific state in which the business is registered.
GST has transformed India's tax structure by simplifying indirect taxation, increasing transparency, and reducing the cascading effect of taxes. The implementation of this system has been a monumental step in improving the ease of doing business in the country. Businesses under specific turnover limits can also explore the GST Composition Scheme for simplified tax compliance and reduced paperwork.
Conclusion
GST has revolutionised the Indian taxation system, unifying multiple taxes into a single structure. From its initial conceptualisation to its eventual implementation, the journey has involved significant efforts from various stakeholders, including political leaders, economists, and tax professionals.
Understanding the evolution of GST, the contributions of its key figures, and the system’s unique features helps businesses and consumers appreciate the benefits it has brought to the Indian economy. If you are a business owner looking for more financial support, a business loan can be a valuable resource. By being informed and staying updated, you can take full advantage of GST and ensure your business remains compliant and competitive in today’s dynamic marketplace. If you are expecting input tax credit, make sure to understand the full GST Refund process. Also, knowing how to file your GST Return on time helps avoid penalties and ensures smooth operations.
