The idea of national GST was first mooted by Kellar Task Force in 2004. A Task Force was formed under the chairmanship of Sri Vijay Kelkar on Implementation of Fiscal Responsibility and Budget Management Act. The Kellar committee submitted recommended fully integrated ‘GST’ on a national basis.
The introduction of GST would be one significant step in the direction of the Unified Indirect Taxation scheme. Subsuming several central and state taxes into a single tax would mitigate cascading or double taxation, facilitating a common national market. The passage of constitutional Amendment Bill by the Parliament in August 2016 tossed a major challenge on the Indian Economy. This constitutional amendment permits, for the first time since independence in 1947, both the Union Government and the states to levy a tax on both goods and services simultaneously, substantially widening the tax base. GST Constitution Amendment Bill became law of the land after receiving presidential assent on September 8, 2016. Taking into consideration the majority of the concerns raised by the Trade and industry, the Government in November 2016 released the revised version of the Model GST Law along with Draft GST Compensation Bill.
GST is commonly described as an “Indirect broad-based consumption tax”. GST is indirect because it is levied on goods, services, and related activities, rather than directly on personal income. It is broad-based because it is applicable to a wide range of transactions, with only limited exceptions. In the context of India, GST integrates the Union Excise duties, Service Tax and State VAT and some other Indirect Taxes into a single levy.
GST will facilitate seamless credit across the entire supply chain and across all states under a common tax base. By this system, the taxation, the cascading impact or the hidden tax costs on the consumers are mitigated and consumers buy goods and services at lower prices For instance when an Automobile manufacturing company makes a vehicle, the Central Government charges an excise duty on them as they leave factors. Whereas on the lower end of the supply chain i. e., at the Retail level, V A T is charged, without giving credit of the excise duty levied earlier. But in the GST system, both Central and State Taxes will be collected at the point of the scale. Both components (the central and state GST) will be charged on the manufacturing cost. It will also result in cost competitiveness of goods and services in the global market with reduced transaction costs for the taxpayers through simplified tax compliance. On economy/revenue front, it will result in increased tax collection due to wider tax before and better conformity.