Roadmap for GST

Roadmap for GST 1. Introduction In view of federal structure of governance in India, there is multiplicity of taxes on goods and services. Excise dut y on manufacture, cus toms duty on impo rts/e xpor ts and service tax on serv ices are levied by Cen tral Government, while sales tax (State Vat), Entry tax/octroi and duty on liquor are levied by State Government. Besides these, there are plethora of taxes like cesses, surcharge, stamp duty, entertain ment tax, road tax and what not. Such multiplicity of taxes distort the tax structure and brings in complexities. Reforms in taxes is of course a continuous process. Cenvat (that time it was termed as ‘Modvat’) was introduced in 1986 in Central Excise to avoid cascading effect of excise duties. Introduction of State Vat started in 2005 and now most of the States have implemented State Vat. GST is a logical consequence of State Vat. Idea of national GST was first mooted by Kelkar Task Force in 2004. A task force was formed under Chairmansh ip of Shri Vijay Kelkar on Implementation of Fiscal Responsibility and Budget Management Act. The Kelkar Committee submitted its report in July 2004. The Committee strongly recommended fully integrated ‘Goods and Service Tax’ (GST) on national basis. Full integration of goods and service tax will obviously take considerab le time, as it can be achieved only after political consensu s is achieved . However, a beginnin g was made by proposing to make credit of service tax and excise duty inter-chargeable. The then Finance Minister Shri P Chidambaram, in para 148 of his budget speech on 8-7-2004, stated as follows, ‘I propose to take a major step towards integrating the tax on goods and services. Accordingly, I propose to extend credit of service tax and excise duty on goods and services. Accordingly, I propose to extend credit of service tax and excise duty across goods and services’. To give effect to this proposal, Cenvat Credit Rules, 2004 were issued and made effective from 10-9-2004. Empowered Committee for GST - The task of designing and implementing GST was taken up Empowered Committee of State Finance Ministers which had also designed the State Vat. The Empowered Committee had appo inted various work ing grou ps and also had various mee ting s to discuss issues rela ting to prop osed national GST. Basic idea of GST considerably diluted - When it was initially proposed as a national GST in 2004, it was projected as a solution to all ills of taxation. It was envisaged that there will be a simple single point GST. All Central and State taxes will be merged in national GST. In short, it was projected as a six lane super highway of taxation. Over the years, basic idea of ‘one single tax’ has been considerably diluted and various compromises have been made. The ‘Empowered Committee of State Finance Ministers’ was holding numerous meetings and trying to sort out various issues. Outside public and taxpayers only had some vague idea how GST is proposed to be implemented, through unauthenticated press reports, some study reports etc. Release of first discussion paper - It appears that some basic ideas about way to implement GST have crystalised. First discussion paper has been released by Empowered Committee of State Finance Ministers on 10-11-2009. Re ort of task force on GST of Thirteenth Finance Commission – Subse uen t to release of first

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Transcript of Roadmap for GST

8/3/2019 Roadmap for GST

http://slidepdf.com/reader/full/roadmap-for-gst 1/1

Besides these, there are plethora of taxes like cesses, surcharge, stamp duty, entertainment tax, road tax andwhat not.

Such multiplicity of taxes distort the tax structure and brings in complexities. Reforms in taxes is of course acontinuous process. Cenvat (that time it was termed as ‘Modvat’) was introduced in 1986 in Central Excise toavoid cascading effect of excise duties. Introduction of State Vat started in 2005 and now most of the Stateshave implemented State Vat.

GST is a logical consequence of State Vat.

Idea of national GST was first mooted by Kelkar Task Force in 2004.

A task force was formed under Chairmanship of Shri Vijay Kelkar on Implementation of Fiscal Responsibility andBudget Management Act. The Kelkar Committee submitted its report in July 2004. The Committee strongly

recommended fully integrated ‘Goods and Service Tax’ (GST) on national basis.

Full integration of goods and service tax will obviously take considerable time, as it can be achieved only afterpolitical consensus is achieved. However, a beginning was made by proposing to make credit of service taxand excise duty inter-chargeable. The then Finance Minister Shri P Chidambaram, in para 148 of his budgetspeech on 8-7-2004, stated as follows, ‘I propose to take a major step towards integrating the tax on goodsand services. Accordingly, I propose to extend credit of service tax and excise duty on goods and services.Accordingly, I propose to extend credit of service tax and excise duty across goods and services’.

To give effect to this proposal, Cenvat Credit Rules, 2004 were issued and made effective from 10-9-2004.

Empowered Committee for GST - The task of designing and implementing GST was taken up Empowered

Committee of State Finance Ministers which had also designed the State Vat. The Empowered Committee hadappointed various working groups and also had various meetings to discuss issues relating to proposednational GST.

Basic idea of GST considerably diluted - When it was initially proposed as a national GST in 2004, it wasprojected as a solution to all ills of taxation. It was envisaged that there will be a simple single point GST. AllCentral and State taxes will be merged in national GST. In short, it was projected as a six lane super highway of taxation.

Over the years, basic idea of ‘one single tax’ has been considerably diluted and various compromises havebeen made. The ‘Empowered Committee of State Finance Ministers’ was holding numerous meetings andtrying to sort out various issues. Outside public and taxpayers only had some vague idea how GST is proposedto be implemented, through unauthenticated press reports, some study reports etc.

Release of first discussion paper - It appears that some basic ideas about way to implement GST havecrystalised. First discussion paper has been released by Empowered Committee of State Finance Ministers on10-11-2009.

Re ort of task force on GST of Thirteenth Finance Commission – Subse uent to release of first