New Delhi: India is on the cusp of ushering in a historic tax reform that has been in the works for more than 10 years. On Wednesday, the goods and services tax (GST) will move a step closer to the 1 July rollout date with the Lok Sabha taking up its supporting bills for consideration and passage. Mint looks at GST’s journey through the years.
1. P Chidambaram, finance minister in the Congress-led United Progressive Alliance (UPA) government, in his 2006 budget speech proposes moving towards GST and sets a deadline of 1 April 2010 for its implementation. He asks the empowered committee of state finance ministers—a representative body comprising finance ministers of all states—to come up with a framework.
2. The empowered committee releases its first discussion paper on GST in November 2009 after consultations with the Central government and within the states.
3. The 13th finance commission backs a consumption-based taxation approach with no exclusions and a low tax rate.
4. The UPA government introduces the constitution amendment bill in the Lok Sabha in March 2011.
5. Parliament refers the bill to the standing committee for finance.
6. The standing committee submits its recommendations in August 2013 after extensive talks with the centre and the states. It recommends that exclusions under GST be kept at a minimum to avoid distortions.
7. The Central government and the states continue to hold talks but a trust deficit continues over the centre’s reluctance to compensate states for losses arising from a phasing out of Central sales tax. Bharatiya Janata Party-ruled states like Gujarat and Madhya Pradesh continue to oppose the bill.
8. The constitutional amendment bill lapses with the dissolution of the 15th Lok Sabha in May 2014.
9. The new National Democratic Alliance (NDA) government in New Delhi renews efforts to strike a consensus with states and promises to pay Central sales tax compensation to states.
10. After extensive talks with states, finance minister Arun Jaitley introduces the revised constitution amendment bill in the Lok Sabha in December 2014. Manages to bring on board states such as Gujarat and Madhya Pradesh.
11. Lok Sabha passes the bill in May 2015.
12. Rajya Sabha passes the bill in August 2016.
13. 50% of the state assemblies ratify the bill in August-September.
14. The Central government notifies provisions of the constitution amendment bill in September 2016; all indirect tax laws of the Centre and the states will cease to exist from September 2017.
15. The GST council, a representative body chaired by the Union finance minister and comprising state finance ministers, is constituted; first meeting takes place on 22-23 September.
16. GST council finalizes 5 laws: The central GST bill, the state GST bill, the union territory GST bill, the integrated GST bill and the GST (compensation to states) bill over 12 meetings between September 2016 and March 2017.
17. The government introduces four of these bills in Lok Sabha on 27 March for consideration and passage on 29 March.
