The history of the GST reform dates back to the year 2000, when the Atal Bihari Vajpayee-led government took some initiatives. The government set up an empowered committee with Asim Das Gupta at the helm. Six years later the concept of GST was brought out in the annual Union budget speech by the Finance Minister. A deadline was set up for April 2010 to launch the GST. However it was never to be, due to the parliamentary disruptions by the opposition BJP. Four years later the tide changed directions and now the BJP led government is pushing for the GST reform with an April 2016 deadline.
A bright concept mooted way back in 2000 is still doing the rounds in the parliament. It will take 16 years or more to finally get implemented is a difficult question to answer. The barometer ranking of doing business in India is pretty low. Time and again the red tape shows its ugly head and that is precisely the reason why we fail in implementing policy decisions. The time has come for us to shed the party politics and rise above petty issues in the larger interest of the economy.
The only relevant argument that came up was in 2011. At this time the GST was being moved as the 115th amendment, where the states felt that the constitution which grants them freedom of fiscal federalism and allows them to formulate, impose and collect taxes is being challenged. The point was valid and the states expressed their disapproval over many issues. They were also concerned with the abolition of CST levied on sales taking place on inter-state basis. CST is a major revenue source for the states. The states demanded adequate compensation for loss of revenue with the GST implementation.
That is how the 122nd constitutional amendment bill was formulated in 2014. It now takes care of the states’ concerns and proposes to take them on board for the introduction of the GST reform. The amendment proposes to levy an additional 1% tax on the goods sold on inter-state basis. This will be paid to the states where the goods originate. This will be applicable for the first few years of changeover to the new system as a compensation for the CST loss.
The GST is likely to resolve the issue of disputed items also, which qualify under both the categories of goods and services currently. The examples are intellectual property rights and work contracts. The intellectual property rights are treated as goods for the purposes of charging sales tax by the states, while the center treats them as services and charges service tax.
There is also a fear among the thousands of tax officers at the state and central levels of being rendered useless as there would be nothing to do after the GST comes into play. The simplicity of the GST made it a cause of concern. However the fear is unfounded as the implementation of GST is a big exercise. The tax officers would be involved fully in the transition and will be working for tax compliance, leakage detection and widening of tax base.