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.
                                                                imPlementAtion Process
             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.