History of GST

No doubt France is the first country to implement GST in 1954.Canada was the first country to introduce Dual GST model in 1991.Recently Malaysia has also introduced GST

France was the world’s first country to implement GST Law in the year 1954. Since then, 159 other countries have adopted the GST Law in some form or other. In many countries, VAT is the substitute for GST, but unlike the Indian VAT system, these countries have a single VAT tax which fulfills the same purpose as GST.

In India, the discussion on GST Bill was flagged off in the year 2000, when the then Prime Minister Atal Bihari Vajpayee brought the issue to the table.  

The origin of Goods and Services Tax could be traced back to July 17, 2000, when the Government of India set up the Empowered Committee of State Finance Ministers with the Hon’ble State Finance Ministers of West Bengal, Karnataka, Madhya Pradesh, Maharashtra, Punjab, Uttar Pradesh, Gujarat, Delhi and Meghalaya as members with the following objectives:

·         to monitor the implementation of uniform floor rates of sales tax by States and Union Territories;

·         to monitor the phasing out of the sales-tax based incentive schemes;

·         to decide milestones and methods of States to switch over to VAT; and

·         to monitor reforms in the Central Sales Tax system existing in the country.

1.       Amaresh Baghchi Report, 1994 suggests that the introduction of “ Value Added Tax (VAT) ‘ will act as root for implementation of Goods and Services Tax in India

2.       Ashim Dasgupta, 2000 empowered committee, which introduces VAT System in 2005, which has replaced old age taxation system in India.

3.       Vijay Kelkar Task Force 2004, it strongly recommended that the integration of indirect taxes into the form of GST in India. 

4.       Announcement of GST to be implemented by 1st April, 2010 after successfully implementation of VAT system in India and suggestion of various committees and task forces on GST, the Union Government first time in Union Budget 2006-07 announced that the GST would be applicable from 1st April, 2010.

In 2000, an empowerment committee was set up by Atal Bihari Vajpayee government to streamline  the GST model  to be adopted..

In 2006, in his budget speech on 28th feb, 2006 P.Chidambaran , yhe then finance minister announced the target date for implementation of GST to be 1st April, 2010 and formed another empowered committee of state finance ministers to design the road map.

In 2014, the 122nd constitution bill was introduced in Loksabha by finance minister Arun Jaitley  on 19th December, 2014 and passed by house on 6th May, 2015.

On 3^rd August, 2016 the bill was passed by Rajyasabha .

On 8^th August, 2016 the amended bill was passed by Loksabha.

In 2017 – Four GST related Bills become Act following Presidents assent & passage in Parliament:

·         Central GST Bill

·         Integrated GST Bill

·         Union Territory GST Bill

·         GST (Compensation to States) Bill

·         CGST: where the revenue will be collected by the central government

·         SGST: where the revenue will be collected by the state governments for intra-state sales

·         IGST: where the revenue will be collected by the central government for inter-state sales

Currently, the Indian tax structure is divided into two – Direct and Indirect Taxes. Direct Taxes are levies where the liability cannot be passed on to someone else. An example of this is Income Tax where you earn the income and you alone are liable to pay the tax on it.

In the case of Indirect Taxes, the liability of the tax can be passed on to someone else. This means that when the shopkeeper must pay VAT on his sale, he can pass on the liability to the customer. So, in effect, the customer pays the price of the item as well as the VAT on it so the shopkeeper can deposit the VAT to the government. This means that the customer must pay not just the price of the product, but he also pays the tax liability, and therefore, he has a higher outlay when he buys an item.

This happens because the shopkeeper has paid a tax when he bought the item from the wholesaler. To recover that amount, as well as to make up for the VAT he must pay to the government, he passes the liability to the customer who has to pay the additional amount. There is currently no other way for the shopkeeper to recover whatever he pays from his own pocket during transactions and therefore, he has no choice but to pass on the liability to the customer.

Goods and Services Tax will address this issue after it is implemented. It has a system of Input Tax Credit which will allow sellers to claim the tax already paid, so that the final liability on the end consumer is decreased.

Thank you friends next time we will meet in next post……….Bye….

Thanks & Regards,

R G Harsha Vardhan

–All the above contents only for Public reference and not for any other purpose. Therefore, I can’t take any responsibility for the results or consequences of any attempt to use or adopt any of the information presented on this blog—