Article 265 of the Constitution of India empowers Central Government to levy and collect tax. Further, it empowers the State Governments to levy sales tax or Value Added Tax(VAT) on the sale of goods and/or services. In addition to this, the Central Sales Tax(CST) was levied on sale of inter State goods and/or services by the Central Government, but was collected and retained by the “exporting” States. Many States also used to levy an entry tax on the goods arriving in their States. This power to collect GST by the Centre and States had led to multiplicity of indirect taxes in India.
Due to the multiplicity of the these taxes, the end result was that it made India a complexed indirect tax structured country. So, in order to simplify and make tax an easy thing to understand for a layman, various taxation reforms were enforced.
– System of VAT on services at the Central Government level was introduced in 2002.
– System of collection of VAT by State Government on intra state trade and CST on inter state trade was introduced in 2005.
Despite all these tax reforms, the indirect taxation still remained to be a complex one. Therefore, it lead to the idea of “One Nation, One Tax” i.e., introduction of GST in India. The genesis of the introduction of GST in the country was laid down in the historic Budget Speech of 28th February 2006, wherein the then Finance Minister laid down 1st April, 2010 as the date for the introduction of GST in the country. Thereafter, there has been a constant endeavor for the introduction of the GST in the country whose culmination has been the introduction of the Constitution (122nd Amendment) Bill in December, 2014. It came into force on July 1, 2017.
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