Know the importance of the new tax system

GST Day 2022: Know the importance of the new tax system

GST Day is observed on July 1 to mark the implementation of the Goods and Services Tax. The new indirect tax system came into force on July 1, 2017, having been launched at a ceremony held in parliament on June 30 at midnight.

GST Day was first observed on July 1, 2018, to mark the first anniversary of the new tax system.

Importance of GST

The introduction of the GST marked an unprecedented reform of the Indian tax system. With its implementation, the government aimed to replace the complex and multi-tiered indirect tax structure with a new transparent, simple and technology-driven tax system.

There are four types of TPS – The Central Tax on Goods and Services (CGST), the State Tax on Goods and Services (SGST), the Territorial Tax on Goods and Services (UTGST) and the Integrated Tax on Goods and Services (IGST) .

The tax system was instituted to break down barriers in interstate trade and commerce and integrate India into a single common market. It is in line with the Make in India campaign and aims to achieve the goal of one nation, one tax and one market. The objective of implementing the GST is to improve the ease of doing business in the country and reduce transaction costs by eliminating the old form of taxes.

Background

The idea of GST was first proposed in 2006 by then Union Finance Minister P. Chidambaram in his budget speech for 2006-2007. Initially, the GST was to be introduced on April 1, 2010, but was finally implemented in 2017.

It was implemented through an amendment to the constitution of India. The Constitution (122nd Amendment) Bill (CAB) was introduced in parliament and passed by the Lok Sabha and the Rajya Sabha. After receiving permission from the President, the bill was signed into law as the 101st Constitution Amendment Act of 2016.

A Goods and Services Tax Council (GSTC) has also been set up to make recommendations to the Union and the States on GST-related matters.