The Goods and Services Tax evolution in India started in the year 2000 when a committee was made to propose legislation regarding the collection of taxes.

In 2017, after the struggle of 17 years, the law evolved and The Goods and Services Tax Bill became the part of the Constitution of India declaring that the parliament, as well as the States, can impose taxes on supply of goods and services(GST).

VAT in India

The main agenda behind it was to stop tax evasion by making whole taxation process easier and to open the doors of global trade in India.

Before this law came into existence, the State and Central government were charging many indirect taxes. Every state had its own tax regime for the collection of VAT. The huge number of taxes was a burden for middle and lower-middle-class and equity were missing among different states. The state was charging VAT on the selling of manufactured goods although excise duty was already charged by the Central government.

India is practicing a binary GST model by the cooperation of Union and State governments. Central excise duty, duties of excise, additional duties of excise, central sales tax, additional duties of customs, special additional duty of customs, entertainment tax, entry tax, State VAT,  purchase tax, luxury tax,  taxes on advertisements, betting, lottery tickets, and gambling were revised in the new model to reduce overlapping of taxes.

In the revised tax regime, the Central and the State governments are administering tax imposed on transactions happening within a single territory by Central GST (CGST) and State GST (SGST) respectively. Integrated GST (IGST) is levied by the Central Government and includes inter-state transactions and imported goods or services. Goods and Services are levied differently based on their demand. Five different tax categories are made that is 0%, 5%, 12%, 18% and 28%.

0% GST  is charged on dairy products, products of milling industries, fresh vegetables, fruits, meat products, and other groceries and necessities like cottage cheese, honey, wheat, rice, cereals, and pulses. Each state government is imposing a tax on alcoholic beverages, electricity and petroleum products(petrol, high-speed diesel, jet fuel, natural gas, etc.) separately and there is the variation on the taxed amount.

5%  is charged on ready-made clothes and on canned products having a registered trademark. The rate on under-construction property booking is 12%. 18% for soaps and 28% on cleaning agents and on the commercial vehicle. They are charging 0.25% on rough precious and semi-precious stones and 3% on gold.

The revised policy is helping local and international traders, businessmen and government by boosting compliance, applying uniformity, and increasing transparency in the sale of goods and services at the lowest level. The cost of goods has been lowered because the GST regime eliminated unnecessary taxes. The government has introduced GST Portal for a quick procedure.

The whole process like registration, return filing, application for refund and response to the notice is monitored online. The cascading effects on the sale of goods and services have been removed by the revised GST model aiding in the economy of India.