17.6 ndian onom
will. Ultimately, only sales taxes of the states were suggested the following tax arrangements under
changed to be named VAT and was started to be it—
collected on the basis of the VAT method (some (i) To be collected on the VAT method (will
states did not join it and some joined later). The have all the same features of the VAT).
experience has been encouraging. (ii) To be imposed at pan-India level with
uniformity in tax—better say a single rate
exPerience of vAt of indirect tax—replacing the
A total number of 20 states/UTs switched over to multiple central and state indirect taxes.
VAT (from their existing sales tax) in April 2005. (iii) Four taxes of Centre (cenvat; service tax;
Rest of the states went for it by 2008–09. Majority stamp duty and central sales tax) and
of the states/UTs saw revenue buoyancy due to nine taxes (excise duty, sales tax/vat;
VAT in the very first year of its implementation entry tax; lease tax; works contract tax;
while few states availed the Central compensation luxury tax; turnover tax; octroi and cess)
facility for their revenue losses, that too for hardly of the states to be merged into the GST.
one or two years. Experience of implementing (iv) To have a single rate of 20 per cent (12
VAT has been quite encouraging—by the financial per cent to flow to Centre and 8 per cent
year 2016–17, the tax revenues of the states and to the states).
UTs were estimated to grow with an annual rate
of around 16 per cent.
This way, the view that the VAT will After studying the Kelkar Committee report, the
increase the tax collections of states has been Government in 2006 decided to introduce the
new tax since the financial year 2010-11. Lack
validated. Similar impact of the proposed GST is
of consensus between the centre and states kept
believed to have on the indirect tax collections of
the process delayed—to sort out the contentious
the states as well as the Centre.
issues, one after another, two independent expert
committees submitted17 their advices to the
Goods and serVice Tax Government. Finally, the Constitution (101st
After implementing the state VAT, the GoI wanted Amendment) Bill, 2016 was cleared by the
Parliament by early August 2016—paving the
to go for the proposed GST (Goods and Services
way for its implementation. By late September
Tax). This is aimed at integrating the indirect taxes
2016, the GST Council (GSTC) was created by
of Centre and states into a single national tax—
the Government. The Council has been entrusted
popularly known as the Single VAT of India. By with the power to make recommendations to the
creating a single market at the pan-India basis it Union and the States on various issues—rates,
will help the business and industry in a big way. floor rates, exemption, etc.—related to GST.
The tax has potential to increase GDP up to 2 per
Finally, the new federal indirect tax GST was
cent (conservative estimates by some experts). All enforced18 by the Government on July 1, 2017.
the benefits which the state VAT brought to the The major features of the tax are as given below:
market and economy are the same in case of the
GST, too. The first proposal16 of the GST had 17. First it was from the National Institute of Public
Finance and Policy (NIPFP) followed by the
16. Vijay Kelkar Task Force on the FRBM Act 2003, Subramanian Committee, during 2016-17.
Ministry of Finance, Economic Survey 2004-05, (New 18. Ministry of Finance, Government of India, N. Delhi,
Delhi: Government of India, 2005), p. 40. July, 2017.