Developing Countries like India, the taxation practice has a very pivotal role in the evolution of the revenues of the Country. The Indian tax practice is tough to apprehend in terms of its protocols and calculations, the scenario remains the same for both Direct and Indirect Tax. The Government of India had committed to replacing all the indirect taxes imposed on the services and goods by The State and The Central Government with effect from the month, April 2017. This made a try and clarify the amount of effect of Goods and Services (GST) Tax on the expansion of the economy, and therefore the advantages for the business and the government and for the purchaser.
Internationally Goods and Services (IGST) Tax is known as VAT (Value Added Tax), Goods and Services Tax (GST) was adopted by France in 1954 and it became the first country to adopt the Goods and Services (GST) tax as its indirect taxation. Most parts of the Countries follow the unified Goods and Services Tax. However, countries like Brazil, Canada dual Goods, and Services (GST) mechanism is prevalent. Under the Dual System, GST is imposed on both, Central and State Governments. India also aims to adopt dual GST.
When did the Goods and Services(GST)Tax start?[i]
- Most of the countries had already established Goods and Services (GST) tax.
- In Australia, the Goods and Services Tax was introduced to replace the, Federal Wholesale Tax[ii] of Australia.
- In New Zealand Goods and Services (GST) tax was implemented in the year 1986.
- In Canada, A hidden Manufacturer’s Sales Tax has replaced Goods and Services (GST) tax.[iii]
- Goods and Services (GST) tax was implemented in Singapore in the year 2004.
- In Malaysia, Goods and Services (GST) is a Value-Added Tax that came into effect in the year 2015.
History of Goods and Services (GST) in India[iv]
In the year 2000
- The idea of adopting the GST was first suggested in India by Atal Bihari Vajpayee Government in 2000. The Ministers of the finance formed an Empowered Committee (EC) to create a structure of Goods and Services (GST), based on the experience in designing State VAT (Value Added Tax). Representatives of the Centre and the States were requested to examine diverse characteristics of Goods and Services (GST) proposition and create reports on the thresholds, generate reports. The finance minister of West Bengal Mr. Dasgupta Committee chaired by Mr. Dasgupta was until 2011.
In the year 2004
- A task force headed by Vijay L. Kelkar, the counselor of the finance ministry, designated that the current tax structure had many complications alleviated by the Goods and Services (GST) system.
In February 2005
- The former Finance Minister, P. Chidambaram, in the financial year 2005-2006 suggested that the medium to long term goal of The Government was to organize a constant Goods and Services (GST) formation across the country, covering the whole production-distribution chain. It was discussed in the Budget Session.
In February 2006-
- 1st April 2010 was introduced as the GST introduction date by the Finance Minister.
In November 2006-
- Parthasarthy Shome, the advisor to P. Chidambaram, mentioned that states will need to prepare and make reforms for the upcoming GST authorities.
In February 2007
- The deadline for GST implementation was continued in the Union Budget 2007-2008 on 1st April 2010.
In February 2008
- The Union Budget of the year 2008-2009, the Finance Minister established that the development was being assembled in production of the roadmap for Goods and Services (GST). The selected timeline for the enactment was confirmed on 1st April 2010.
In July 2009
- The New Finance Minister of India, Mr. Pranab Mukherjee declared the basic skeleton of the Goods and Services (GST). On 1st April 2010, the time-line was being followed.
In November 2009
- The Empowered Committee headed by Mr. Asim Dasgupta to put forth the First Discussion Paper (FDP), narrated the suggested Goods and Services authorities.
In February 2010
- The Government established the mission-mode project that laid the foundation for Goods and Services (GST). This with a budgetary investment of INR 1,133 crore, computerized commercial taxes in the states. Following the execution of Goods and Services (GST) was pushed by one year.
In March 2011
- When the Congress party was in power it put the Constitution (115th Amendment) Bill for the introduction of Goods and Services (GST). The opposition party protested against it and the Bill was sent to a standing committee for detailed examination.
In June 2012
On the commencement of discussion on the bill by the standing committee, the opposition party raised concerns on Article 279(b) that offered additional powers to the Central Government over the Goods and Services (GST) dispute authority.
In November 2012
- Chidambaram the Finance Minister in June 2012 along with all the other Finance Ministers states held meetings and set the deadlines for resolution of issues as on 31st December 2003.
In February 2013
- The Finance Minister at that time of the budget session announced about the government providing INR 9,000 crores as compensation to the states. It was also appealed to the state finance minister to work associated with the government for the establishment of indirect tax reform.
In August 2013
- The panel approved the report with few amendments to the provisions of tax structure and mechanism of resolution.
In October 2013
- Gujrat opposed the bill as it intended to perceive that it will have to bear the loss of INR 14,000 crore per annum on the rule of destination-based tax.
In May 2014
- The Amendment Bill of the Constitution lapsed and in the same year, Mr. Narendra Modi was voted in power at the Centre.
In December 2014
- Arun Jaitley, India’s new finance minister submitted the Constitution (122nd Amendment) Bill, 2014 in the parliament. On this, the opposition demanded that the Bill should be sent for the discussion to the standing committee.
In February 2015
- Arun Jaitley in the budget speech advised the government to look into the execution of the Goods and Services (GST) mechanism by 1st April 2016.
In May 2015
- The Lok Sabha passed the Constitution Amendment Bill. It was announced by Mr. Arun Jaitley that petroleum should be kept out of the reach of Goods and Services (GST).’
In August 2015
- As we all know, Bills regarding taxation has an advantage that after taking approval form Lok Sabha does not require approval from Rajya Sabha. So, the Bill was not passed by the Rajya Sabha.
In March 2016
- On-demand of the Congress Government, Goods, and Services (GST) rate was not set above 18%. But, Mr. Arun Jaitley ruled out the fixed rate of tax on claiming that if the Government in an unforeseen emergency is required to take tax rate it would have to take the permission of the parliament.
In June 2016
- A draft model law on Goods and Services (GST) was released by the ministry of finance to the public expecting suggestions and views of them.
In August 2016
- Congress as the opposition finally agreed to the proposals laid by the Government about four broad amendments to the bill. The bill was then passed in the Rajya Sabha.
In September 2016
- Consent was given by the President of India for the Constitution Amendment Bills to become an Act.
In the year 2017
By the following approval of the Parliament and the assent of the President, Four Bills related to GST become Act-
- Central Goods and Services (GST) Bill
- Integrated Goods and Services (GST) Bill
- Union Territory Goods and Services (GST) Bill
- Goods and Services (GST) Compensation to State Bill
The Goods and Services (GST) council finalized the Goods and Services (GST) rates and rules.
The Government announced that the Goods and Services (GST) Bill was applicable from 1st July 2017.
Objectives/Aim of the Goods and Services (GST) Act
Increasing National wealth by curbing black money and tax evasion, and disturbing the economic benefits to all the main objective of Goods and Services (GST) -Union Minister Venkaiah Naidu[v]
Objectives of Goods and Services (GST)[vi]
- The first and foremost objective of GST was to create a constant and justified tax rate for the whole of the India. In other terms, it creates One Nation, One Tax, One Market.
- GST subdues the cascading effect of taxes as it allows businesses to set-off their taxes spent on purchases when they connect these purchases to business revenues by further selling them. In this way, they are able to avail of the amount spent on tax by deducting it from the amount claimed of an output tax credit.
- Exports have been included as Zero-Rated Supplies, GST is collected on the inputs but is refunded once the export has been made. Thus, making exports as Zero-Rated Tax.
- GST enlarges the tax base by including every justified and responsible tax-payer.
- Almost every administrative procedure of GST, whether be it registration of GST, tax assessment, filing return has been made through digital portals and procedural time is prescribed promptly.
“The main aim of Goods and Services (GST), which Prime Minister Narendra Modi termed pretty much as good and straightforward Tax. It is to simplify the taxation mechanism, to reduce the burden of taxes, and clarify conformity of the tax payment.”
This will have a check on black money and the result will increase in value and diminish the tax overburden on people because the number of tax-payers will rise in number.
There were some issues after the demonetization. In a way, people got accustomed to the activity. But, if we modify a small amount of tax evasion it will lessen. Also, the tax burden will lessen and will reduce the middlemen’s mechanism.
Goods and Services (GST) was intended for more than 15 years only then it was enacted. It became law only by consensus.
Reasons for the Goods and Services (GST) Act[vii]
The goods and services tax reform that took quite a decade of intense discussion it was finally implemented with effect from 1st July 2017 subsuming the majority of all indirect taxes of the Central and the State levels.
Goods and Services Tax was publicized as ‘one nation, one tax’ by the Government, and aims to produce a simplified tax for the regime in line with the tax framework applicable in several major economies across the world. The tax has helped streamline various indirect taxes and brought in additional efficiency and business. Goods and Services Tax law in India is a comprehensive, multi-stage, destination-based tax that is imposed on every value addition.
The implementation of GST got overwhelming support from the industry. The industry took this as a chance to redefine the supply-chain model, customize IT processes, and evaluate internal and external arrangements to safeguard the interest and minimize their tax cost.
Writer’s Comment and Conclusion
Goods and Services Tax can be called transparent and to an extent it can also be said to be a corruption-free indirect tax. GST is business-friendly as well as consumer-friendly. We needed a change in the taxation system, unlike the old taxation regime GST waives off the cascading effect of taxation. Now, dealing with taxes has become much easier (administration) whether be it a B2B, B2C, C2C, B2G transactions, registered or unregistered person, composite or mixed supply, takes into account the concerns of every State and Union Territories. This is the reason why India urges to opt for GST.
Countries implementing GST have stronger chances of better negotiation in the International Trade Forums. GST’s tax assessment covers Small and Medium-Sized Enterprises (SME’s) and the unorganized sectors, thus increasing the taxpayer base. This will enhance the Indian market’s competitiveness in the global economic market.
[i] https://www.bankbazaar.com/tax/history-of-gst.html Last visited this page on 5/6/20.
[ii] Introduced in the year 2000.
[iii] In the year 1995.
[iv] https://www.bankbazaar.com/tax/history-of-gst.html Last visited this page on 5/6/20.
[v] https://www.moneycontrol.com/news/business/economy/main-aim-of-gst-is-to-simplify-taxation-process-venkaiah-naidu-2319699.html Last visited this page on 5/6/20.
[vi] http://www.brainkart.com/article/Benefits-of-GST_35035/ Last visited this page on 5/6/20.
[vii]https://www.pwc.in/tax-and-regulatory-services/indirect-tax/ gst.html#:~:text=GST%2C%20which%20was%20publicised%20as,in%20more%20efficiencies%20in%20business. Last visited this page on 5/6/20.
This article is authored by Eshti Kapoor Student, 3rd-year VSLLS, Vivekananda Institute of Professional Studies, Guru Gobind Singh Indraprastha University.
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