Why was GST implemented in India?

In the 2006-07 Budget statement, the then-Union Finance Minister proposed moving to GST for the first time. GST was supposed to go into effect on April 1, 2010. The Empowered Committee of State Finance Ministers (EC), which created State VAT, was tasked for developing a GST path and structure.

Joint Working Groups of officials from the states and the center were formed to investigate various elements of GST and produce reports, particularly on exemptions and thresholds, taxation of services, and taxation on inter-state supplies. The EC issued its First Discussion Paper (FDP) on the GST in November 2009, based on internal and external talks with the Central Government. This outlined the features of the proposed GST and has served as the foundation for discussions between the Centre and the states thus far.

The Goods and Services Tax (GST) and Centre-State Financial Relations

Currently, the Constitution firmly delineates budgetary authorities between the Centre and the States, with nearly little overlap between the two realms. The Centre has the power to impose taxes on items manufactured (excluding alcoholic liquor for human consumption, opium, drugs, and so on). In contrast, the States have the power to impose taxes on goods sold.

The Centre has been entrusted to charge a tax (the Central Sales Revenue) on inter-state sales, but the originating states collect and retain the tax entirely. In terms of services, only the Centre has the authority to charge Service Tax.

Because the states lack the authority to levy taxes on the sale or purchase of products during their importation or exportation from India, the Centre levies and collects this tax in addition to the Basic Customs Duty, this customs duty (also known as CVD and SAD) offsets excise duty, sales tax, state VAT, and other taxes levied on similar domestic products. The introduction of GST necessitated constitutional adjustments to allow the Centre and the States to tax and collect GST simultaneously. And enables the vendor to filegst returns at the end of every fiscal year.

The delegation of concurrent jurisdiction for the levy of GST to the Centre and the States necessitated the creation of a one-of-a-kind institutional system to ensure that decisions about the structure, design, and operation of GST are made jointly by the two. On December 19, 2014, the122nd Amendment Constitution Bill was introduced in the 16th Lok Sabha to address all of these and other issues. The Bill proposes a 5% GST fee on providing all products and services except alcoholic beverages for human consumption. The tax will be levied separately as Dual GST but concurrently with the Union (CGST) and the States (SGST). The Parliament will have sole authority to levy GST (IGST) on interstate trade or commerce in goods and services (including imports). In addition to GST, the Central Government will have the authority to charge excise duty on tobacco and tobacco products. This was a brief history of why GST was implemented in India. To know more about mobile phone gst, click here.

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