One year of GST: How this big idea came into existence

With introduction of Goods and Service Tax (GST) largest tax reform has been implemented in the country where state and central governments can together make decisions on indirect taxes. Under the new tax regime, the monthly collections have reached nearly Rs 1 lakh crore, but there is also a growing demand for further simplification of the process. The 5 slab rates are being asked to be reduced to mere three along with other demands to make it pro-people and to enhance it greater acceptance among the traders. 

No doubt, the project has faced technical issues when it was launched across the country at one go, but the government has plugged the holes and has also interacted with captains of industry to take their feedback for corrections. 

This big idea was not a result of the present dispensation led by Prime Minister Narendra Modi, but has witnessed continuous debate in the earlier UPA regime. Let us try to understand how the idea of GST evolved in India.

It is said that the idea of GST was first mooted in 1986 by Sanjeet Singh, the then Finance Minister in Rajiv Gandhi cabinet, who introduced Modified Value Added Tax (MODVAT) which further progressed under the regime of PV Narasimha Rao whose Finance Minister Manmohan Singh started early discussion on a Value Added Tax (VAT) at the state level, but a uniform tax system was first proposed during the Atal Bihari Vajpayee government and the idea was further concretised with advice of former RBI governors including IG Patel, Bimal Jalan and C Rangarajan.

In 2002, the Vajpayee government formed a task force under Vijay Kelkar to recommend tax reforms, and the panel took three years to submit its report on GST. On February 28, 2006, the then Union Finance Minister in his Budget for 2006-07 proposed that GST would be introduced from April 1, 2010. The Empowered Committee of State Finance Ministers (EC), which had formulated the design of State VAT, was requested to come up with a roadmap and structure for the GST. 

Joint working groups of officials having representatives from states as well as the centre were constituted to examine various aspects of the GST and draw up reports specifically on exemptions and thresholds, taxation of services and taxation of inter-State supplies. 

Based on discussions within and between it and the Central government, the Empowered Committee released its first discussion paper (FDP) in November 2009, spelling out features of the proposed GST, which formed the basis for the present GST laws and rules.

In March 2011, Constitution (115th Amendment) Bill, 2011 was introduced in the Lok Sabha in this regard, but due to lack of political consensus, the Bill could not pass, and the 15th Lok Sabha was dissolved in August 2013.

On December 19, 2014, the Constitution (122nd Amendment) Bill 2014 was introduced in the Lok Sabha, which passed it in May 2015 after a lengthy debate. The Bill was then sent to the Rajya Sabha, which referred the bill to the Joint Committee of the Upper House and the Lok Sabha on May 14, 2015. 

The Select Committee submitted its report on July 22, 2015, and then the Constitutional Amendment Bill was moved on August 1, 2016 after a political consensus. The Bill was passed by the Rajya Sabha on August 3, 2016, and by the Lok Sabha on August 8, 2016. The Bill was then ratified by required number of state legislatures and after getting assent of the President, the amendment was notified as Constitution (101st Amendment) Act 2016 on September 8, 2016. The Constitutional amendment paved the way for introduction of Goods and Services Tax in the country.

After GST Council approved the Central Goods and Services Tax Bill 2017 (The CGST Bill), the Integrated Goods and Services Tax Bill 2017 (The IGST Bill), the Union Territory Goods and Services Tax Bill 2017 (The UTGST Bill), the Goods and Services Tax (Compensation to the states) Bill 2017 (The Compensation Bill), the Lok Sabha passed these Bills on March 29, 2017. The Rajya Sabha also passed these Bills on April 6, 2017. These Bills were then enacted as Acts on April 12, 2017. 

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Thereafter, different state legislatures have passed respective State Goods and Services Tax Bills. After the enactment of various GST laws, GST was launched with effect from 1st July 2017 by Prime Minister Narendra Modi in the presence of the then President of India, Pranab Mukherjee, in a mid-night function at the Central Hall of Parliament.