Tryst with unified indirect tax regime

Tryst with unified indirect tax regime

Tryst with unified indirect tax regime

At the stroke of the midnight hour, when the world sleeps, India will awake to a new indirect tax regime.

In what could be the biggest tax reform in the country since the independence, the country will transcend into a consolidated tax regime — Goods and Services Tax (GST).

The new tax regime, which will make the taxation process in the country far easy, by abolishing state-wise value added tax regimes, excise regimes, service tax, octroi and other levies and will unify the $2 trillion Indian economy and 1.3 billion people. But for the ease that GST regime will be offering, it has gone through a roller-coaster ride for 17 long years in its implementation.

It all started in the year 2000, with the Prime Minister Atal Bihari Vajpayee, adhering to the advice of an economic advisory panel of IG Patel, Bimal Jalan and C Rangarajan, setting up a committee headed by the then finance minister of West Bengal Asim Dasgupta to design a uniform taxation regime in the country. The committee was also mandated to look into the modalities of putting in place the back-end technology and logistics for rolling it out.

Determined towards a unified tax regime, Vajpayee led National Democratic Alliance (NDA) government constituted a task force in 2003 under the chairmanship of noted economist and academician Vijay Kelkar to recommend tax reforms.

The serious brainstorming started when the Kelkar committee suggested rolling out of GST, which was seconded by the 12th Finance Commission.

The major thrust on GST started in 2006 when the then Finance Minister P Chidambaram called for bringing in GST regime in his Budget Speech, setting up implementation date of April 1, 2010.

Despite his successor retaining the implementation date, the GST could not see the light of day, due to the political tussle.

Having missed the implementation date put UPA into a fire fighting mode. The finance ministry started large-scale, what it called mission-mode computerisation of commercial taxes in states, with a view lay the foundation for the GST.
In 2011, the Finance Minister introduced the constitution amendment bill in the Lok Sabha, but as with the most legislations in our country, the bill was referred to the standing committee of Parliament for finance. In the discussion that followed, Bharatiya Janta Party (BJP), which was back then in opposition, and Left opposed the extra discretionary powers given to centre under GST.
After standing committee submitted its recommendation in 2013, Chidambaram said that the government had set Rs 9,000 crore to compensate states for losses due to GST. Gujarat government sabotaged any move towards GST, claiming that the state would have to incur over Rs 14,000 crore losses every year due to GST.

However, with coming to power, the opposition of Narendra Modi ceded into the implementation of GST. Aided by Finance Minister Arun Jaitley, Lok Sabha ratified the revised constitution amendment bill in 2015.
However, in Rajya Sabha, where opposition benches outnumber the ruling ones, the bill seemed to face a challenge. After deliberations, in August 2016, Rajya Sabha passed the bill, followed by 50% of the state assemblies passing the bill in August-September. In the following months GST Council, chaired by Jaitley, worked on the modalities of the legislation.

After 17 years, missing three deadlines, seeing three Prime Ministers and seven Finance Ministers, GST will usher into a reality at midnight stroke of June 30, 2017.

Though all is not done yet, as Jammu and Kashmir has not still ratified GST due to the political stalemate, and needs to be worked out at the earliest.