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2 years of GST; Timeline of India’s common indirect taxation system

Goods and Services Tax (GST)  today completed 2 years of its implementation. GST came to effect from 1st of July 2017 through the Narendra Modi government’s One Hundred and First Amendment of the Indian Constitution. It replaced the already existing multiple flowing taxes levied by the state and central government.

The initial idea of a common taxation system in India was proposed by Prime Minister Vishwanath Pratap Singh in the budget of 1986-1987. Later Prime Minister Atal Bihari Vajpayee introducing the concept set up a committee under then West Bengal Finance Minister Asim Dasgupta to design a GST model. The Vajpayee government also formed a task force under Vijay Kelkar to recommend tax reforms.

In 201, the  UPA-II tabled 115th Constitution Amendment Bill in the Lok Sabha for bringing GST which was referred to Parliamentary Standing Committee on Finance led by Yashwant Sinha. As the 15th Lok Sabha got dissolved in 2014 the GST Bill cleared by Standing Committee got lapsed.

The Narendra Modi government again in 2014introduced the GST Bill in Lok Sabha with the name of Constitution (122nd) Amendment Bill. The bill was passed by the Rajya Sabha in 2016 with two-third majority. In May 2017 the GST Council fits over 1,200 goods in one of the four tax slabs of 5, 12, 18 and 28 %. Over 80% of goods of mass consumption either exempted or taxed under 5% slab. Later in June 2017 all states except Jammu and Kashmir passed SGST law.

In its first month of implementation, the government earned ₹93,590 crore from the Goods and Services Tax which went to its highest till 113,865 crore in April 2019.

The tax collections in GST is divided in four different tax slabs for collection of tax  5%, 12%, 18% and 28%. However, petroleum products, alcoholic drinks, and electricity are not taxed under GST and instead are taxed separately by the individual state governments, as per the previous tax regime.

GST has expanded the coverage of indirect tax by about 50% over the tax base earlier to bring in 3.4 million new taxpayers, has made taxation more transparent and difficult to evade, but loose ends like leaving out important parts of the economy such as land, electricity, inflict its cost of businesses.

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