History of GST in India - Features and Benefits of implementation

History of GST: Know more about the timeline of the key events that led to the introduction of GST law in India. Know about Its types, features, and benefits.
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3 min
13 Aug 2024
Goods and Services Tax (GST) is a comprehensive indirect tax in India that replaced multiple taxes. It simplifies the tax structure by unifying them under a single system, making compliance easier and promoting economic growth through a uniform taxation system.

When did GST start?

The Goods and Services Tax (GST) in India was implemented on 1st July 2017. This significant tax reform aimed to unify the fragmented indirect tax structure in the country. The GST subsumed various state and central taxes, providing a streamlined taxation system. The introduction of GST marked a new era in the Indian taxation landscape, promoting ease of doing business and enhancing tax compliance. The launch was celebrated with a midnight session of the Parliament, symbolising a transformative shift towards a more efficient and transparent tax regime.

Who introduced GST in India?

The introduction of the Goods and Services Tax (GST) in India was a collaborative effort spearheaded by the Government of India. The GST was introduced under the leadership of then Prime Minister Narendra Modi. The implementation of GST was a landmark achievement, bringing together numerous indirect taxes under one umbrella. The Union Finance Minister at the time, Arun Jaitley, played a crucial role in steering the GST Bill through Parliament and facilitating consensus among states. The GST aimed to simplify the tax structure, reduce tax evasion, and boost the overall economy.

History of GST Bill and GST Act in India

  • Early discussions: The concept of GST in India was first proposed in the year 2000 by the Atal Bihari Vajpayee-led government. A committee was formed to design a GST model suitable for India.
  • Empowered committee: In 2004, an Empowered Committee of State Finance Ministers was set up to develop a framework for GST and address state concerns.
  • Proposal by Finance Minister: In 2006, then Finance Minister P. Chidambaram proposed GST implementation by April 1, 2010, in his budget speech.
  • Constitution Amendment Bill: The 115th Constitutional Amendment Bill was introduced in 2011 to facilitate the introduction of GST. However, it lapsed due to the dissolution of the 15th Lok Sabha.
  • Introduction of the 122nd Amendment Bill: The 122nd Constitutional Amendment Bill was introduced in 2014 and passed by both Houses of Parliament in 2016.
  • GST Council formation: The GST Council, responsible for overseeing the implementation and regulation of GST, was constituted in September 2016.
  • GST Act: The Central GST Act, Integrated GST (IGST) Act, Union Territory GST (UTGST) Act, and the respective State GST (SGST) Acts were enacted in 2017, laying the foundation for the GST regime in India. 

Timeline and evolution of GST

  • 2000: Introduction of the concept of GST by the Vajpayee government and formation of a task force.
  • 2004: Empowered Committee of State Finance Ministers established to develop the GST model.
  • 2006: Finance Minister P. Chidambaram sets a target date for GST implementation.
  • 2009: First discussion paper on GST released by the Empowered Committee.
  • 2011: The 115th Constitutional Amendment Bill introduced in Parliament but later lapsed.
  • 2014: The 122nd Constitutional Amendment Bill reintroduced and passed by the Lok Sabha.
  • 2016: Bill passed by the Rajya Sabha, leading to Presidential assent for the 101st Constitutional Amendment.
  • 2016: Formation of the GST Council to finalise GST rates and regulations.
  • 2017: Passage of GST laws and rollout of GST on 1st July.

Taxes before GST introduction

  • Value Added Tax (VAT): States levied VAT on the sale of goods, leading to multiple tax rates and structures across states.
  • Service Tax: Central government imposed service tax on various services, creating a distinction between goods and services taxation.
  • Excise Duty: Manufacturers paid excise duty on the production of goods, contributing to a complex tax regime.
  • Sales Tax: Sales tax was levied on the sale of goods, often resulting in cascading taxes.
  • Central Sales Tax (CST): CST applied to inter-state sales, adding to the tax burden.

Decisions taken by the GST Council

  • GSTIN allocation: The GST Council decided on the allocation of a unique Goods and Services Tax Identification Number (GSTIN) for every taxpayer under the GST regime.
  • GSTN network: The GST Council approved the establishment of the Goods and Services Tax Network (GSTN) to manage the IT infrastructure required for GST implementation.
  • Rate structure: The council finalised the four-tier rate structure for GST, including 5%, 12%, 18%, and 28% slabs.
  • Exemptions and thresholds: Decisions on exemptions for certain goods and services and the threshold limit for GST registration were made by the council.

Key features of the GST regime

The key features of GST regime include: 

  • Unified tax system: GST replaces multiple indirect taxes with a single tax structure, eliminating the complexity of various state and central taxes.
  • Input tax credit: Businesses can claim input tax credit for taxes paid on purchases, reducing the overall tax burden and avoiding the cascading effect.
  • Dual GST model: The GST regime follows a dual model, with Central GST (CGST) and State GST (SGST) for intra-state transactions and Integrated GST (IGST) for inter-state transactions.
  • Simplified compliance: A unified tax regime with common return filing and payment systems simplifies compliance for businesses.
  • Composition scheme: Small businesses with turnover below a certain threshold can opt for the composition scheme, paying a lower tax rate with simplified compliance.
  • GST Council: The GST Council, comprising representatives from both the central and state governments, ensures collaborative decision-making on GST-related matters.
  • E-way bill: The introduction of the e-way bill system for tracking the movement of goods helps in reducing tax evasion and ensuring seamless transportation.

Benefits of GST implementation

The implementation of GST has streamlined the taxation process, eliminating the cascading effect of multiple taxes. It has enhanced transparency, making tax compliance easier for businesses. GST has also contributed to the formalisation of the economy, leading to a broader tax base. The uniform tax structure has simplified the supply chain, reducing logistics costs. Overall, GST has fostered a more business-friendly environment, promoting economic growth.

How is GST calculated?

GST is calculated based on the value of goods and services supplied. The applicable GST rate is multiplied by the transaction value to determine the tax amount. For instance, if the GST rate is 18% and the transaction value is Rs. 1,000, the GST amount would be Rs. 180. Businesses can use a GST calculator to accurately determine the tax payable. The GST calculator helps in ensuring correct tax computation, aiding in seamless compliance and financial planning.

Conclusion

The introduction of GST has been a transformative step in India's taxation system, simplifying the tax structure and promoting transparency. The streamlined processes and unified tax rates have made it easier for businesses to operate efficiently. The GST Council's decisions have further refined the system, ensuring its effective implementation. With its numerous benefits, GST continues to play a vital role in India's economic development. For businesses, understanding and leveraging GST, alongside tools like the GST calculator, is crucial for optimising financial operations.

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Frequently asked questions

What is the history of GST?
The history of GST in India began in 2000 with the introduction of the concept by the Vajpayee government. After years of deliberation, the 122nd Constitutional Amendment Bill was introduced in 2014 and passed in 2016. The GST Council was formed to finalise rates and regulations. On 1st July 2017, GST was officially implemented, replacing multiple indirect taxes with a unified tax system, simplifying the tax structure, and enhancing compliance and transparency in the Indian economy.

Who is the founder of GST in India?
The Goods and Services Tax (GST) in India does not have a single founder but is the result of a collective effort by multiple governments over many years. The concept was first proposed in 2000 by the Atal Bihari Vajpayee-led government. However, it was under the leadership of Prime Minister Narendra Modi and Finance Minister Arun Jaitley that GST was successfully implemented on 1st July 2017, marking a significant milestone in India's tax reform history.

When was GST's first day?
The Goods and Services Tax (GST) in India was officially implemented on 1st July 2017. This day marked the beginning of a new era in the Indian taxation system, aiming to unify various indirect taxes under a single tax regime. The launch of GST was celebrated with a special midnight session of Parliament, symbolising a significant shift towards a more streamlined and transparent tax structure for businesses and consumers across the country.

Which act introduced the GST?
The Goods and Services Tax (GST) in India was introduced through the 101st Constitutional Amendment Act, 2016. This act paved the way for the implementation of GST by amending the Constitution to empower both the Centre and the States to levy and collect GST. The 101st Amendment Act was a crucial legislative step that facilitated the transition to a unified tax regime, replacing multiple indirect taxes and simplifying the tax structure across the country.

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