It has been a year since the Goods and Services Tax (GST) was rolled out in India. On 1 July 2017, the Centre launched the ‘one nation one tax’ regime that has since gone through a roller-coaster ride with the verdict divided over its efficacy. After one year of GST, while some have labelled the regime – which was designed to replace the confusing indirect tax grid – as complex and cumbersome, others have hailed it for removing the multiple indirect taxes and bringing a single tax structure for the $2-trillion economy in a country of 1.3 billion people.

The GST, as a concept, is not unique to India and is the standard indirect tax system in developed economies including Malaysia, Singapore, Canada and Hong Kong.

GST has now replaced over a dozen central and state levies including factory-gate, excise duty, service tax and local sales tax or VAT. Aimed at modernising Asia’s third largest economy, the GST is India’s biggest tax reform in 70 years of independence.

The path to the GST

It took 17 years since the introduction of the concept by former Prime Minister Atal Bihari Vajpayee for the GST to become a reality.

In the year 2000, then Prime Minister Atal Bihari Vajpyee set up a committee headed by the then West Bengal Finance Minister Asim Dasgupta to design a GST model.

Four years later, Vijay Kelkar, who was then the advisor to the Finance Ministry, recommended the GST to replace the existing tax regime. His recommendation was in line with similar practises in other economies. The government changes and the UPA came to power.

Here is a quick look at the timeline

28 February 2006: GST appears in the Budget speech for the first time; Finance Minister P Chidambaram sets 1 April 2010 as deadline for GST implementation. He says that the Empowered Committee of finance ministers will prepare a road map for GST. The committee is constituted in 2008.

10 November 2009: Empowered Committee presents discussion paper in the public domain on GST welcoming debate. The Empowered Committee had in April 2008 submitted a report titled ‘A Model and Roadmap Goods and Services Tax (GST) in India’ to the government.

2009: Finance Minister Pranab Mukherjee announces basic structure of GST as designed by Dasgupta committee but the BJP opposes the basic structure.

February 2010: Mission-mode computerisation of commercial taxes initiated by the Finance Ministry to lay the foundation for GST rollout. The GST is deferred to 1 April 2011.

22 March 2011: UPA-II tables 115th Constitution Amendment Bill in the Lok Sabha for bringing GST.

29 March 2011: GST Bill referred to Parliamentary Standing Committee on Finance led by Yashwant Sinha. Following Asim Dasgupta’s resignation, Kerala Finance Minister KM Mani takes over.

November 2012: Meetings with state finance ministers held by Finance Minister P Chidambaram to resolve all issues by 31 December 2012 for GST rollout.

February 2013: Chidambaram in his Budget speech makes provision for Rs 9,000 crore to compensate states for losses incurred because of GST.

August 2013: In its report Parliamentary standing committee suggested improvements on GST. Bill gets ready for introduction in Parliament.

October 2013: Gujarat Chief Minister Narendra Modi opposes the Bill saying that his state would incur losses worth Rs 14,000 crore every year due to GST.

May 2014: Dissolution of the Lok Sabha with the BJP-led NDA government coming to power leads to the lapsing of the GST Bill cleared by Standing Committee.

18 December 2014: The 122nd Constitution Amendment Bill to GST approved by Cabinet.

19 December 2014: The Constitution (122nd) Amendment Bill is introduced by Finance Minister Arun Jaitley in the Lok Sabha amid Congress’ objections.

February 2015: Deadline for GST rollout set for 1 April 2016.

6 May 2015: Lok Sabha passes GST Constitutional Amendment Bill.

August 2015: Bill blocked in Rajya Sabha as Congress demands that the GST rate be capped at 18 per cent.

July 2016: Centre opposes capping GST rate at 18 per cent and gets states around.

3 August 2016: Rajya Sabha passes the Constitution Amendment Bill by two-thirds majority.

2 September 2016: 16 states ratify GST Bill; President Pranab Mukherjee gives assent to the Bill.

12 September 2016: Union Cabinet clears formation of GST Council.

22-23 September: Council meets for the first time.

3 November: GST Council agrees on four-slab tax structure of 5 per cent, 12 per cent, 18 per cent and 28 per cent along with an additional cess on luxury and sin goods.

16 January 2017: Jaitley announces 1 July as GST rollout deadline. Centre, states agree on contentious issue of dual control and taxing rights on goods at high sea.

18 February: GST Council finalises draft compensation bill providing to make good any revenue loss to states in first five years of GST rollout.

4 March: GST Council approves CGST and Integrated-GST bills.

20 March: Cabinet approves CGST, IGST and UT GST and Compensation bills.

27 March: Jaitley tables CGST, IGST, UT GST and Compensation bills in Parliament. Lok Sabha and Rajya Sabha pass all the four key GST Bills — Central GST (CGST), Integrated GST (IGST), State GST (SGST) and Union Territory GST (UTGST).

18 May: GST Council fits over 1,200 goods in one of the four tax slabs of 5 per cent, 12 per cent, 18 per cent and 28 per cent. Over 80 per cent of goods of mass consumption either exempted or taxed under 5 per cent slab.

GST Council fixes cess on luxury and sin goods to create kitty for compensating states.

19 May: GST Council decides on 5 per cent, 12 per cent, 18 per cent and 28 per cent as tax slabs.

21 June: All states except Jammu-Kashmir pass SGST law.

28-29 June: Mamata Banerjee, the Congress and the Left Front decide to skip midnight launch of GST.

30 June midnight: GST rolls out.

The government also launched a GST Network portal but technical glitches starting from the very first day caused a lot of hardship to taxpayers in registering on the network.

How did leaders react at the time of GST’s introduction?

It is not surprising that the leaders who are part of the government were all praise of the GST and the leaders in Opposition harboured reservations. Prime Minister Narendra Modi labelled it as the move that will “end tax terrorism and inspector raj”. Finance Minister Arun Jaitley fielded the accusations of the opposition by stating that all the decisions taken by the GST council was through consensus.

Trinamool Congress chief Mamata Banerjee had said, “At the stroke of midnight on 14 August 1947, India won her freedom. Now, at the stroke of midnight of 30 June 2017, freedom and democracy stand to face grave danger.”

Congress president Rahul Gandhi, who was then the vice-president of the party, had said, “A reform that holds great potential is being rushed through in a half-baked way with a self-promotional spectacle.”

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“It is not the original GST that experts had drafted earlier, this will seriously impact inflation,” said former Finance Minister P Chidambaram at the time.

Delhi’s Deputy Chief Minister Manish Sisodia had termed the GST a “good idea with bad implementation”.

One year of GST: Has it succeeded?

After one year of GST, there is no uniformity in the views on whether it has achieved what the government claims to. There are as many detractors of the system as there are supporters. What is, however, clear is that the new system has greatly benefitted in many ways by doing away with the multiple taxes imposed by central and state governments by replacing it with a ‘single’ rate. Earlier, the manufacturers had to carefully analyse the tax rates in states to zero in on the most competitive investment locations. They can now base their decisions on availability of resources and skills.

Further, the single tax system ended the delay in the inter-state movement of goods at state border checkposts. The price of delays and escalation of transaction costs was eventually borne by consumers.

And belying Chidambaram’s belief, the GST did not clause inflation. There were two major reasons why inflation didn’t strike. According to reports, the first reason was the multi-slab structure which ensured that the incidence of tax didn’t rise and the second reason was the anti-profiteering authority which, though set up after the GST rollout, prevented businesses from abusing the transition.

But GST has not satisfied everyone, especially the common man. Only 21 per cent of the over 32,000 people in 215 districts of India said their monthly household grocery bills had reduced after the GST implementation while 63 per cent disagreed on this count. According to a survey conducted by LocalCircles, a citizen engagement platform, 54 per cent said that cost of services (mobile, movie tickets etc) has gone up. And 57 per cent think that the cost of eating at a restaurant has increased after GST implementation. In November 2017, the GST rate for restaurants was reduced from 18 per cent to five per cent.

The survey said only 15 per cent consumers felt that businesses were passing the benefits of Input Tax Credit under the GST regime to them. Many consumers had earlier reported that sellers were befooling them by charging GST on discounted prices and this was against the MRP rule.

How much did GST help the government earn?

GST collections fell for two consecutive months from over Rs 92,000 crore (later revised to Rs 95,132 crore) in September to Rs 83,346 crore (later revised to Rs 85,931 crore) in October, and Rs 80,808 crore (later revised to Rs 83,716 crore) in November.

Post the introduction of the e-way bill system, collections rose. The GST revenue for the entire 2017-18 fiscal stood at Rs 7.41 lakh crore.

In March 2018 the collection was Rs 89,264 crore. On 1 May, the Finance Ministry said that the government had earned a revenue of Rs 1 lakh crore from GST for the month of April – the first time that the collection went past that mark.

“The buoyancy in the tax revenue of GST reflects the upswing in the economy and better compliance,” the Finance Ministry said.

The future roadmap

After one year of GST, economists believe a single tax would better serve the purpose, though not everyone is of the same opinion. Outgoing Chief Economic Advisor Arvind Subramanian believes that the highest rate should go.

“I think the 28 per cent rate has to go. The cesses may have to remain, but there should be just one rate on cesses… Today, we have GST rates of zero, 3 per cent (for gold), 5 per cent, 12 per cent, 18 per cent and 28 per cent. We need to rationalise but I think at the first instance the 28 per cent should go,” Subramanian had said while speaking to The Indian Express.

The 28 per cent slab is the highest standard GST rate in Asia and the second highest in the world after Chile.

NITI Aayog vice-chairman Rajiv Kumar has said that GST has put the economy on a completely different paradigm now because more and more pressure will be on people to register under GST and bring their economic activity into the formal sector.

In its biannual India Development Update report, the World Bank acknowledged  that the multiple tax rates make India’s GST among the most complex in the world.

“To make things worse, petroleum products, power and real estate have been kept outside the GST ambit,” the report noted.

(With inputs from agencies.)