The introduction of Goods and Services Tax (GST) would be a very significant step in the

field of indirect tax reforms in India. By amalgamating a large number of Central and State
taxes into a single tax, it would mitigate cascading or double taxation in a major way and
pave the way for a common national market. From the consumer point of view, the biggest
advantage would be in terms of a reduction in the overall tax burden on goods, which is
currently estimated at 25%-30%. Introduction of GST would also make Indian products
competitive in the domestic and international markets. Studies show that this would
instantly spur economic growth. Last but not the least, this tax, because of its transparent
character, would be easier to administer.
In 2000, the Vajpayee government set up the Empowered Committee of State Finance Ministers with the
aim of facilitating a switch from the existing national-level central excise duty and state-level sales tax
model to a value added tax (VAT) model. [10] It was given the task of designing the GST model and
overseeing the IT back-end preparedness for its rollout. The committee was headed by Asim
Dasgupta, Minister for Finance and Excise of West Bengal.
Dr. APJ Abdul Kalam pointed out that although the indirect tax policy in India has been steadily
progressing in the direction of the value added tax (VAT) principle since 1986, the existing system of
taxation of goods and services still suffered from many problems and had suggested a comprehensive
goods and services tax (GST) based on the VAT principle. GST system is targeted to be a simple,
transparent and efficient system of indirect taxation as has been adopted by over 130 countries around
the world. This involves taxation of goods and services in an integrated manner as the blurring of line
of demarcation between goods and services has made separate taxation of goods and services
untenable.

GST could soon be a reality owing to the open support of a majority in the 243member Rajya Sabha. PM Modi is determined to build a consensus over the
passage of the GST bill in the current monsoon session of the Parliament and
wants to leave no stone unturned to bring the reform.
There are a plethora of indirect taxes at the Central and state levy on the
consumption of goods and services within India. In comparison, direct taxes are
levied on a persons income for instance, the Income Tax.
Excise and duty tax are two biggest indirect taxes at the Central level that will be
replaced by the GST. At the state level, some of the biggest indirect taxes that will
be replaced by the GST include sales tax as well as entry tax and octroi both of
which are levied on certain goods entering a city to name a few. However, taxes
on petroleum, tobacco, and some other categories of products will be kept out of
the GST.
Replacing this bevy of taxes by the GST will simplify the overall taxation regime.
However, it could also result in a loss of revenue to the Centre and many states.

Therefore, the panel headed by Chief Economic Adviser, Dr Arvind Subramanian,

tasked with deciding rates of taxation under GST, had recommended a revenue
neutral rate of 15-15.5%. As its name suggests, this is the rate which preserves
revenue at current levels. However, the final decision on the rate (or a range of
rates) will be taken by a body called the GST Council, which will have
representatives from the Centre and states.
The history of the GST in India goes back more than 10 years. In the 2006 Union
Budget during the Congress-led United Progressive Alliance rule, then Finance
Minister P Chidambaram had proposed the introduction of this tax from April 1,
2010.
The journey from then to the GST Bill in the Lok Sabha last year has indeed been
long. There have been disagreements on contentious issues such as whether or
not to include items such as petroleum and tobacco that are large revenueearners for states and how to compensate for losses incurred by states by
bringing so many taxes under one umbrella.
These issues have taken a long time to sort out and finally, in May 2015, the Lok
Sabha passed the GST Bill. It is now pending in the Rajya Sabha and, given that
the BJP is making a renewed effort to reach out to opposition parties to bring
about a consensus on contentious issues, the Bill is expected to be passed soon.
Even Prime Minister Narendra Modi recently said: I do not think any political
party will try to commit suicide by opposing GST.
What lies ahead
But there are still some hurdles that the GST Bill will have to clear. First, it will
need to be passed by the Rajya Sabha with a two-thirds majority. Adjournments
and disruptions of Parliament sessions will only delay this. Second, assuming the
Bill makes it through the Rajya Sabha, it will to have to be ratified by the
legislative assemblies of at least 15 states (that is, more than half of the 29 states
in India). The President will then approve the GST Bill for enactment. Fourth, 60
days after the Bill is enacted, the GST Council (consisting of representatives from
the Centre and States) will be formed. Finally, the GST Council will recommend
the rules and structure for implementation. This step could take some time
considering the many categories of goods under indirect taxes that will have to
be migrated to a new rate of tax under the GST.
A big move forward
This means that there is at least a year to go before the GST is implemented. But
when that does happen, it has the potential to bring meaningful changes to the
taxation regime in India.

While the introduction of the Service Tax in 1994 bought a vast number of
untaxed services within the tax administration, it is now time for India to move to
a unified regime of indirect taxes. In doing away with the myriad and complicated
indirect taxes between state and Centre, the GST is likely to simplify the overall
taxation regime. Consumers will benefit from a more transparent system of
taxation, while manufacturers will benefit from easier payment and administration
of their taxes.
Obviously, none of this will happen overnight, and maybe not even in a year. But
then, structural reforms take time and their benefits will also be seen only over
the longer term.
A proposal to introduce a national-level Goods and Services Tax (GST) by April 1, 2010 was first
mooted in the Budget Speech for the financial year 2006-07. Since the proposal involved reform/
restructuring of not only indirect taxes levied by the Centre but also the States, the responsibility of
preparing a Design and Road Map for the implementation of GST was assigned to the Empowered
Committee of State Finance Ministers (EC). In April, 2008, the EC submitted a report, titled "A Model
and Roadmap for Goods and Services Tax (GST) in India" containing broad recommendations about
the structure and design of GST. In response to the report, the Department of Revenue made some
suggestions to be incorporated in the design and structure of proposed GST. Based on inputs from
GoI and States, The EC released its First Discussion Paper on Goods and Services Tax in India on
the 10th of November, 2009 with the objective of generating a debate and obtaining inputs from all
stakeholders.
A dual GST module for the country has been proposed by the EC. This dual GST model has been
accepted by centre. Under this model GST have two components viz. the Central GST to be levied
and collected by the Centre and the State GST to be levied and collected by the respective States.
Central Excise duty, additional excise duty, Service Tax, and additional duty of customs (equivalent
to excise), State VAT, entertainment tax, taxes on

tteries, betting and gambling and entry tax (not

levied by local bodies) would be subsumed within GST.

In order to take the GST related work further, a Joint Working Group consisting of officers from
Central as well as State Government was constituted. This was further trifurcated into three SubWorking Groups to work separately on draft legislations required for GST, process/forms to be
followed in GST regime and IT infrastructure development needed for smooth functioning of
proposed GST. In addition, an Empowered Group for development of IT Systems required for Goods
and Services Tax regime has been set up under the chairmanship of Dr. Nandan Nilekani.