History of GST Explained with Timelines

Goods and Services Tax (GST) is a single tax levied on goods and services from manufacturing to consumption, eliminating all indirect taxes previously levied. The implementation of GST was one of the biggest indirect tax reforms of recent times in India.

When did GST start?

The history of GST goes back as early as the year 1954, when it was first adopted by France, followed by over 160 countries worldwide. Malaysia was one of the most recent countries to adopt a valued-based tax system, GST, back in 2015. GST was first introduced in India in 2017 when they decided to introduce a dual tax structure system.

Who introduced GST in India?

In 2014, the then Finance Minister, Mr Arun Jaitley, introduced the Constitution Amendment Bill in the parliament. In May 2015, the Constitution (122nd Amendment) Bill was passed in the Lok Sabha. The Integrated GST Bill, 2017, the Union Territory GST Bill, 2017, the Central GST Bill, 2017, and the GST (Compensation to States) Bill, 2017 were passed by the Lok Sabha and the Rajya Sabha by the 20th of April 2017. On the 1st of July, 2017, GST was officially rolled out.

Brief history of GST Bill and GST Act in India

The history of GST traces back more than 20 years ago to the year 2000 when the first discussion with regard to India adopting GST was made at a time when the Atal Bihari Vajpayee government was in reign. An empowered committee of state finance ministers was chosen for this purpose since they had prior experience working with State VAT. The Fiscal Responsibility and Budget Management Committee was formed in 2004, and the Committee recommended the introduction of GST. 

During the 2006-07 Budget Speech, the then Union Finance Minister announced that GST would be introduced by April 1, 2010. However, for various reasons, the introduction of GST had to be pushed further. The Constitution (115th Amendment) Bill, 2011, was introduced in the parliament. This Bill was introduced to incorporate certain provisions of GST and was examined in detail by a Standing Committee. With the dissolution of the Lok Sabha in 2014, the Bill lapsed, thus warranting the need for a new Constitutional Amendment Bill.

Timeline and evolution of GST

• 2000
  • An Empowered Committee consisting of State Finance Ministers is set up. 
• 2006
  • The then Finance Minister, P Chidambaram, announced the implementation of GST on April 1, 2010.
• 2009
  • The Empowered Committee of State Finance Ministers submitted the first discussion paper on GST in India.
• 2010
  • President Pranab Mukherjee announced the delay in introducing GST, proposing to introduce it in April 2011.
• 2011
  • The Constitution (115th Amendment) Bill focused on the introduction of GST in India was introduced in the Lok Sabha.
  • The Lok Sabha then refers the Bill to the Standing Committee on Finance for a detailed examination.
• 2013
  • The Standing Committee on Finance submits the report on the Constitution (115th Amendment) Bill.
• 2014
  • The Lok Sabha dissolution leads to the lapse of the Bill.
  • The Constitution (122nd Amendment) Bill introduced in the Lok Sabha focused on introducing GST.
• 2015
  • The Bill was passed by the Lok Sabha and referred to a Select Committee in the Rajya Sabha.
  • The Select Committee submits the report.
  • Chief Economic Advisor-led Committee submits a report on the possible GST rates.
• 2016
  • The Bill is passed by both the Lok Sabha and the Rajya Sabha and is then notified as the Constitution (101st Amendment) Bill.
  • The first state to ratify the Bill in Assam.
  • President Pranab Mukherjee gives his assent to the Bill.
  • The Union Cabinet approves the setting up of the GST Council, following which the first GST Council meeting is held in New Delhi.
• 2017
  • The CGST Bill, IGST Bill, UTGST Bill, and GST (Compensation to States) Bill is introduced in the Lok Sabha.
  • The Bills are passed by the Lok Sabha and the Rajya Sabha, after which the GST Acts are notified.
  • The GST Council notifies GST rates and cess on goods and services.
  • 1st July, the official rollout of GST.

• 2018
  • Introduction of TDS provisions along with the filing of GSTR-7
  • Introduction of E-way bill system for inter-state movement of goods
• 2019
  • The reverse charge mechanism is made applicable
  • Restrictions on availment of ITC for Section 36(4)
• 2020
  • Introduction of e-invoicing voluntarily
  • Quarterly return monthly payment scheme
  • June – Relief to taxpayers in view of COVID-19
• 2021
  • Introduction of GSTR-8 and GST on service supplied by restaurants through e-commerce operators
  • GST on services supplied by State Govt. to their undertakings or PSUs by way of guaranteeing loans taken by them

Taxes before GST introduction

Prior to the implementation of GST, the major taxes were:-

• VAT (State level tax)

VAT (Value Added Tax) is an indirect tax levied on goods and services sold intra-state. Output VAT was charged on sales made by a dealer. On the other hand, Input VAT could be claimed as a tax credit for the VAT charged on business purchases.

• Excise Duty

Products manufactured domestically (within the country) were subject to excise duty levied by the Central Government. It was also known as CENVAT (Central Value Added Tax).

• Customs Duty

A tax levied on imports and exports (international transactions) was a customs duty. The idea behind charging customs duty was to ensure that domestic products are safeguarded and also to be able to regulate the movement of goods.

• Central Sales Tax

The sale or purchase of goods at an inter-state level was subject to the levy of Central Sales Tax, an indirect tax imposed by the central government. 

• Service Tax

The tax levied on service providers for services they provided (excluding the list of services that came under the negative list) was termed a service tax. Technically, although the tax is levied on the service providers, the tax is paid by the customer at the time of availing the service.

Changes after GST introduction

• GST is focused on the “supply” of goods and services as opposed to the older taxes that were also applicable to the manufacturing process. Since it is focused on supply, it is regarded as a destination-based tax.
• It has replaced a host of taxes, including-
  • Service tax
  • Central Excise Duty
  • Additional duties related to Excise
  • Special Additional Customs Duty
  • Additional duties related to Customs
  • Other cesses and surcharges
• GST has absorbed the following taxes-
  • Central Sales Tax
  • Value Added Tax (VAT)
  • Luxury Tax
  • Purchase Tax
  • Entertainment Tax (except taxes levied by local entities)
  • Taxes on lottery, gambling, advertisements
  • Entry Tax
• Since it follows the ”one nation, one tax” ideology, the cascading effect of taxes is now mitigated.
• Fresh GST registrations are necessary for every state where the business has branches or intends to make outward supplies.
• The components of GST include-
  • CGST – Central GST
  • SGST – State GST
  • IGST – Integrated GST
• Section 9 (4) deals with the Reverse Charge Mechanism, which is unique to GST, where a person buying goods from an unregistered dealer will be liable to pay GST on a reverse charge basis.
• Section 9 (5) deals with the GST charged on the supply of services by restaurants through e-commerce operators.
• Sections 51 and 52 of the GST Act came into effect to state the authority and procedure with regard to the TDS mechanism under GST.
• E-way bill system was introduced to track the inter-state movement of goods and is mandatory where the value of the goods transported exceeds Rs.50,000.
• The introduction of e-invoices is a significant step towards combating tax evasion.
• GST is a digital tax since the returns, and their related details are filled through the web portal. The supporting documents are also submitted on the portal, thus enabling easy tracking of transactions.