An innovative idea that lingered in the mind of one of our beloved and great Prime Ministers Shri Atal Bihari Vajpayee with the rationale of having a paradigm shift in the taxation structure of the nation. Being in the nascent stage, his idea couldn’t be implemented during his tenure due to Number of amendments that were introduced in order to make and implement the same. The attempts to implement the same failed in 2011, 2013 and 2015, after which it finally came into existence in the form of the goods and Service Tax (GST), when the Parliament finally put its stamp of approval on the historic 101st amendment to the Constitution of India on 08 September 2016.
Lagaan or Taxes are not new to any country and ours especially as the system has been in place since ancient times. Chanakya’s Arthshastra also puts revenue as the mainstay of a King’s treasury. However, we should consider our uniform taxation as an outgrowth of the system that was introduced by the British. Post-independence, Central excise Duties were levied only on selected few commodities such as raw materials, etc. Subsequent reforms were introduced, bringing in the interstate trade and commerce in the ambit of Taxation regimes. However, the rates at which the taxes were being levied became a liability on the citizens leading to a cascading effect on the Tax system. The economic policy of 1991 included the broadening of the scope of taxation by taxing services and lowering of rates and extension of VAT duties were subject to special excise duties. Taxation of Services was introduced in 1999 with limited scope and low rate initially, gradually creeping up to 15 %. VAT was designed in 1999 by GoI/MoF and was fully implemented in the country by 2008. The introduction of GST changed the financial architecture of the nation which, albeit reduced the cascading effect, but created havoc in the Indian Economy.
The GST was introduced primarily to thwart the economic slowdown that was occurring due to scarce knowledge of the taxation system being followed in the country. The 101st Amendment brought in the following pertinent changes, contributing to the achievement of the Uniform Taxation Structure, viz:-
- By bringing residuary power of legislation under Art 246 A empowered the state to make laws wrt GST, imposed by the Centre, but also allows the Centre to make laws wrt Interstate Trade, thus giving more opportunity to Centre vis a vis the state in terms of Revenue. Centre reigns supreme.
- Amendment to Art 249 gives power to the Parliament to make laws related to GST in The National Interest. Centre reigns supreme.
Amendment to Art 250 allows related to GST to be made during the GST period, which clearly implies that the taxation policy would always be fluid and may change course as per the whims and fancies of the policy makers.- Repealing of Art 268 brought Service Tax under the ambit of GST.
The framework of GST is still evolving and teething problems would always be there. However, in order to achieve the dream of One Nation, One Tax regime, the evolution has to continue and at a fast pace. What Ails the GST, can be easily explained by a fish bone diagram?
The aim of the GST was to bring in Uniformity in the Country’s Taxation Code, but implementation of the same has resulted in an economic purge. The concept and philosophy is good, but the methodology of executing the same requires to be holistically reviewed. There is inordinate need of revisiting the present framework post deriving lessons from what ails the GST.
About author –
This article is authored by Adv. Pooja Kohli,BA,LLB,LLM,PGDFM,MBA(HR),Punjab & Haryana High court,Chandigarh
