GST (Goods and Services Tax): Important Topics for UPSC Exams
What is GST?
- It is an indirect tax for the whole country on the lines of “One Nation
one Tax” to make India a unified market.
- It is a single tax on supply of Goods and Services in its entire product
cycle or life cycle i.e. from manufacturer to the consumer.
- It is calculated only in the “Value addition” at any stage of a goods or
- The final consumer will pay only his part of the tax and not the entire
supply chain which was the case earlier.
- It has been established by the 101st constitutional amendment act and
there is a provision of GST Council to decide upon any matter related to GST
whose chairman in the finance minister of India.
What taxes at centre and state level are incorporated into the GST?
At the State Level:
- State Value Added Tax/Sales Tax
- Entertainment Tax(Other than the tax levied by the local bodies)
- Octroi and Entry Tax
- Purchase Tax
- Luxury Tax
- Taxes on lottery, betting and gambling
At the Central level:
- Central Excise Duty
- Additional Excise Duty
- Service Tax
- Additional Customs Duty(Countervailing Duty)
- Special Additional Duty of Customs
Timeline of GST
- 1986: Vishwanath Pratap Singh, Finance Minister in Rajiv Gandhi’s
government, proposed in the Budget a major overhaul of the excise taxation
structure. Similar to GST in a theoretical sense.
- 2000: Initiating discussions on GST, Vajpayee government appoints
an Empowered Committee headed by the then finance minister of West Bengal
- 2004: Vijya Kelkar, then advisor to the Finance Ministry,
recommends GST to replace the existing tax regime.
- Feb 28, 2006: GST appears in the Budget speech for the first
time. Finance Minister Chidambaram sets an ambitious task of implementing
GST by April 1, 2010.
- Feb 28, 2007: Chidambaram said in his Budget speech that the
Empowered Committee of finance ministers will prepare a road map for GST.
- April 30, 2008: The Empowered Committee submits a report titled
'A Model and Roadmap Goods and Services Tax (GST) in India' to the
- Nov 10, 2009: Empowered Committee submits a discussion paper in
the public domain on GST welcoming debate.
- Feb 2010: Government launches project for computerisation of
commercial taxes. Finance Minister Pranab Mukherjee defers GST to April 1,
- March 22, 2011: Constitution Amendment Bill (115th) to GST
introduced in the Lok Sabha
- March 29, 2011: Bill referred to Standing Committee on Finance.
- Nov 2012: Finance minister and state ministers decide to resolve
all issues by Dec 31, 2012.
- Feb 2013: Declaring government’s resolve to introduce GST, the
finance minister makes provisions for compensation to states in the Budget.
- Aug 2013: The standing committee submits a report to Parliament
suggesting improvements. But the bill lapsed as the 15th Lok Sabha was
- Dec 18, 2014: Cabinet approval for the Constitution Amendment
Bill (122nd) to GST
- Dec 19, 2014: The Amendment Bill (122nd) in the Lok Sabha
- May 6, 2015: The Amendment Bill (122nd) passed by the Lok Sabha
- May 12, 2015: The Amendment Bill presented in the Rajya Sabha
- May 14, 2015: The Bill forwarded to joint committee of Rajya
Sabha and Lok Sabha
- Aug 2015: Government fails to win the support of Opposition to
pass the bill in the Rajya Sabha where it lacks sufficient number.
- Aug 3, 2016: Rajya Sabha passes the Constitution Amendment Bill
by a two-thirds majority.
- Assam: 1st State to pass GST bill.
- 1 July 2017: GST to be applicable across India.
Benefits of GST
For Central and State Governments
- Simple and Easy to administer: because multiple indirect taxes at
the central and state levels are being replaced by a single tax “GST”.
Moreover, backed with a robust end to end IT system, it would be easier to
- Better control on leakage: Because of better tax compliance,
reduction of rent seeking, transparency in taxation due to IT use, an
inbuilt mechanism in the design of GST that would incentivize tax compliance
- Higher revenue efficiency: Since the cost of collection will
decrease along with an increase in the ease of compliance, it will lead to
higher tax revenue.
For the Consumer:
- The single and transparent tax will provide a lowering of inflation.
- Relief in overall tax burden.
- Tax democracy that is luxury items will be taxed more and basic goods
will be tax-free.
For the Business Class
- Ease of doing business will increase due to easy tax compliance.
- Uniformity of tax rate and structure, therefore, better future business
decision making and investments by the corporates.
- Removal of cascading effects of taxes.
- Reduction in transactional cost will lead to improved competitiveness.
- Gain to the manufacturer and exporters.
- It is expected to raise the country GDP by 2% points.
- 1st Federal Institution of India, as per finance minister.
- Will approve all decision related to taxation in the country.
- It consists of Centre, 29 states, Delhi and Puducherry.
- Centre has 1/3rd voting rights and states have 2/3rd voting rights.
- Decisions are taken after a majority in the council.
- Recently 5 supporting laws to the GST were recommended by the council, 4
for the parliament Central GST, Compensation law, Integrated GST, Union
Territory GST, and a state GST will be passed by the respective state
- Tax slabs are decided as 0%, 5%, 12%, 18%, 28% for different types of
goods and services whose final categorization is yet to be done.