GST

History of GST Explained with Timelines

The launch of GST benefited many stakeholders, namely industry, government, and the consumer, and it turned out to be a win-win situation for the entire nation. GST gave a boost to the economy and made the goods and services globally competitive and even lowered the cost of goods and services, but the journey from a tiresome indirect tax regime to a simplified and user-friendly regime took 10 years to ideate, deliberate, formulate, and implement.

It is a tax regime that integrates the central and local governments, forming a single interface for the taxpayers and is considered one of the biggest experiments in fiscal federalism to keep alive the truest spirit of democracy.

It is a regime where the tax is levied on the supply of goods and services in an integrated manner by way of inter-state supply, i.e. the tax is levied by the federal government but is administered and apportioned jointly by the centre and the state governments.

The introduction of GST is new to India, but historically, the foundation of this tax regime dates back to 1954, and it took India 63 years to introduce this regime.

History & Evolution of the Concept of GST

• The history of GST traces back to the 20^th century. In 1954, France was the first country in the world to implement GST law, the reason being to reduce tax evasion.
• The concept of GST was devised by Maurice Laure, a French economist and a joint Director in the French tax authority, in 1954. He referred to it as “taxe sur la valeur”, i.e. value added tax, and defined GST/VAT as a consumption tax payable on the goods and services consumed by persons, business organizations and individuals.
• By 1970-80, most of the European countries adopted GST.
• Till 2023, around 160 countries have opted for this mode of taxation.
• Certain countries have a dual system of GST, including India; Canada first introduced this system.
• In a dual GST system, the central and state governments have the power to levy and collect taxes.
• New Zealand introduced GST in 1986.
• Singapore implemented GST in 1994.
• Australia introduced GST on 1^st July 2000.
• Malaysia introduced GST in the year 2015.

Comparative Study of Standard GST/Vat Rates in India and Other Countries (In percentage)

S.NO.	NAME OF THE COUNTRY	STANDARD GST RATE	REDUCED GST
	India	18	28,12,5
	Australia	10	–
	Brazil	Intrastate-17to19	Interstate- 7 to 12 Import- 18-25
	Canada	5	Standard VAT- 5%
	China	13	9 TO 6
	France	20	10,5.5,2.1
	Germany	19	–
	Indonesia	10	–
	Japan	10	–
	South Korea	10	–
	Malaysia	10	6,5
	Mexico	16	0
	Netherlands	21	9
	New Zealand	15	–
	Pakistan	18	–
	Russia	28	18,12,5,0
	Singapore	8	–
	Switzerland	8	–
	Thailand	7	–
	UK	20	–

Relevance & History of Taxes in Indian Economy

India follows a federal structure of government, which includes both the central and state levels of government, and the basic structure of socialist, secular, and democratic republic stays uncompromised at both levels.

Both governments are responsible for managing the country’s developmental needs, and to meet these needs, the primary source of income is tax.

Tax is a contribution that a person makes towards the development of the country, and it is within the power of both state and central government to collect taxes, resulting in the fragmentation of taxes. The centre was responsible for levying tax on the goods at the production or manufacturing stage, whereas the state was empowered to tax goods at the distribution stage. Levying tax on services was the responsibility of the state.

Journey of GST Till 1^st July 2017

• Atal Bihari Vajpayee government in 2000, for the first time, suggested adopting Goods and Services Tax (GST), a unified tax system for all goods and services throughout the country.
• In the same year, an empowered committee of state finance ministers was established to recommend the reforms needed for sales in the tax regime in the country.
• In the year 2002-04, the Fiscal Responsibility and Budget Committee (FRBM) was formed, which recommended the introduction of GST.
• In 2006, the union finance minister, in his budget speech, announced the introduction of GST On 1^st April 2010.
• The empowered committee was tasked with developing a roadmap and structure for GST based on their experience in designing the state VAT.
• In November 2009, The representatives of the state and the centre were combined into joint working groups to examine the various aspects of GST and to draw a report about the taxation on services, exemptions, and thresholds. The empowered committee released its first discussion paper (FDP) on the GST based on this discussion.
• In 2011, the Constitution (115^th Amendment) Bill was introduced in the parliament, incorporating GST with its relevant provisions in front of a standing committee for detailed examination.
• In the year 2014, with the dissolution of the 15^th Lok Sabha, the GST Bill lapsed, directing a need for a fresh constitutional amendment Bill.
• In December 2014, Finance Minister Arun Jaitley introduced the 122^nd Amendment Bill in the Parliament.
• In May 2015, the constitutional amendment bill was passed in Loksabha.
• After it passed in Loksabha, the bill was sent to the Rajya Sabha, where it was referred to a select committee.
• In July 2015, the select committee submitted its report suggesting certain amendments, and the Rajya Sabha passed the bill on 3^rd August 2016 and by the Lok Sabha on 8^th August 2016.
• The Act was ratified by 50% of the states, after which the Hon’ble President gave his assent to the constitutional government bill, which later on became an Act which came into force with effect from 8^th September 2016 vide the constitution (101^st Amendment Act).

Major Recommendations That Led To the Foundation of the GST Act in India

From the year 2016 to 17, 16 path-breaking GST Council meetings were held, resulting in the official implementation of the GST Act on 1^st July 2017, a magnificent Act that will shine bright in the history of Indian democracy.

S.NO.	GST COUNCIL MEETING NO.	DATE	RECOMMENDATIONS
	1st GST Council meeting	22nd -23rd September,2016	Roll out GST with effect from 1st April 2017
	2nd GST Council meeting	30th September,2016	Rules were drafted for registration, payment of tax, tax returns, invoices, refunds, etc.Nominal growth rate of 14% for calculation of compensation amount payable to states.
	4th GST Council meeting	3rd -4th November,2016	Tax slabs with four rate structures, i.e. 5%, 12%, 18%&28%.
	9th GST Council meeting	16th January,2017	Issues surrounding dual control issues, i.e. between centre and state, were resolved with the passing of required guidelines.
	10th GST Council meeting	18th February, 2017	Need of Draft compensation bill
	11th GST Council meeting	4th -5th March,2017	Draft of CGST & IGST bills.
	12th GST Council meeting	16th March,2017	Draft of SGST & UTGST bills.
	13th GST Council meeting	31st March, 2017	Rules about cancelling registration, return, payment, refund, and invoices are recommended.
	14th GST Council meeting	18th -19th May, 2017	GST rates on goods and servicesGST compensation cess rates.
	15th GST Council meeting	3rd June, 2017	Rules on remaining business processes.GST rollout w.e.f. July, 2017
	16th GST Council meeting	11th June, 2017	Accounting rules

At the stroke of midnight hour on 1^st of July 2017, the Hon’ble President and Prime Minister pressed a symbolic button to signify the launch of GST with which India entered the era of one nation: one tax: one market.

The then finance Minister, Shri Arun Jaitley, GST as the biggest and the most ambitious tax reform and the consensus among various parties was a high point in Indian polity when the world saw slow growth and divisiveness.

Major Recommendations That Led To the Successful Implementation of the GST Act in India

S.NO.	GST Council meeting No.	Date	Recommendations
	21st & 22nd GST Council meeting	5th august & 9th September,2017	Reduction in GST from 18% to 5% on certain job work and services. Relief for MSME sector GST on works contract services supplied reduced from 18% to 5%
	23rd GST Council meeting	10th November, 2017	Pruning of list of 28% rated goodsGST in restaurant service was reduced from 18% to 5%
	24th GST Council meeting	16th December, 2017	e-way bill system introduced
	25th GST Council meeting	15th January,2018	Rationalization of GST rates. GST rates were reduced from 28% to 18% on theme parks, joy rides, etc.
	26th GST Council meeting	10th March, 2018	E-way bill introduced for intra-state movement of goods in a staggered manner
	28th GST Council meeting	21st July, 2018	Further pruning of list of Goods attracting 28% GST rate.
	31st GST Council meeting	22nd December, 2018	70:30 Valuation scheme for renewable energy equipment to resolve disputes.Interest to be levied on Net Tax liabilityGST rate on cinema tickets above Rs. 100/- to be reduced from 28% to 18%, and on those up to 100/- from 18% to 12%
	32nd GST Council meeting	10th January,2019	Composition scheme for services Higher threshold limit for a supplier of goods.
	33rd GST Council meeting	24th February, 2019	A special scheme was formulated for the Real Estate sector.
	35th GST Council meeting	21st June, 2019	E-Invoicing Introduced
	37th GST Council meeting	20th September, 2019	Compliance relief for the MSME sectorAmendments in GST Acts given the creation of new union territories of jammu&Kashmir and LadakhDisbursal of return by a single authorityFiling of annual returns in Form GSTR-9 is optional for taxpayers with aggregate annual turnover up to Rs. 2 crore.Filing of reconciliation statement in FORM GSTR-9C waived for taxpayers having aggregate annual turnover up to Rs. 5 crore.GST rate on diamonds reduced from 5% to 1.5%Restructuring of GST rates on hotel accommodation with maximum rate to be reduced from 28% to 18%
	38th GST Council meeting	18th December,2019	Amnesty scheme for late fees for delayed filing of returns.Single uniform GST rate on lottery
	39th GST Council meeting	14th March, 2020	Rationalization of inverted duty structure on certain goods.Introduction of FORM GSTR-2BReduced GST rate on aircraft MRO services to be reduced from 18% to 5% to boost the domestic MRO industry
	40th GST Council meeting	12th June, 2020	Amnesty scheme for late feeInterest in filing of returns.
	42nd GST Council meeting	5th & 12th October,2020	Features of the return filing process enhancedQRMP scheme
	43rd GST Council meeting	28th May, 2021	Rationalization of duty on specified COVID-related Goods.Reconciliation statement in FORM GSTR-9C to be self-certified.
	44th GST Council meeting	12th June, 2021	Reduction in GST rates of covid related items
	45th GST Council meeting	17th September, 2021	Reduction in GST rates of covid related itemsSpecial scheme for a supplier of bricks, etc.Clarifications related to GST rates on goods.
	46th GST Council meeting	31st December, 2021	Deferment of revised rate structure in the textile sector
	47th GST Council meeting	28th and 29th June,2022	Rate rationalization to remove inverted duty structure on certain goods and servicesRefunds of accumulated ITC are not to be allowed in certain cases.Rate changes on certain goods & services.Clarifications on GST rates on certain Goods and services.Certain trade facilitation measures by way of amendment in CGST Rules like change in the formula for calculation of refund in inverted duty cases, further waiver of late fees for delaying filing of GSTR-4, and additional modes for payment of tax.Clarifications on certain procedural issues.Certain measures for streamlining compliances in GST.
	48th GST Council meeting	17th December, 2022	Decriminalization of certain offences under section 132Increase in the threshold of the amount of tax for prosecution and reduction in the amount of compounding in GST.
	49th GST Council meeting	18th February 2023	Government of India to clear the entire pending balance of GST compensation.Adopted report on GST Appellate Tribunal with certain modifications.Approved Report on capacity-based taxation and special composition schemes in certain sectors on GST.Changes in GST rates of ‘rab’, i.e. liquid jaggery and pencil sharpener.
	50th GST Council meeting	11th July 2023	Measures to be adopted for facilitation of trade and to streamline compliance.Certain amendments were proposed in rules 10A, 21A (2A), 21A (4), 59(6), 9, and 25 of the GST Act.
	51st  GST Council meeting	2nd August, 2023	The taxation landscape on online gaming horse racing and casinos changed to 28% full value.

Conclusion

It took India 18 years of debates and discussions to make GST part of its taxation regime, and in these 18 years, several meetings of the GST council¹ were held which discussed the loopholes in the then-existing indirect tax regime, four bills were introduced, a committee was set up to design a Goods and Services Tax model, Kelkar task force was given the responsibility of fiscal and budget management ultimately resulting in a nationwide implementation of a fully integrated GST regime.

FAQs

1. https://gstcouncil.gov.in/