In my next 15 years in the finance ministry (the last eight as CEA), I maintained an abiding interest in tax policy reform and was fortunate to work with mostly receptive and supportive finance ministers, and finance and revenue secretaries. As regards VAT/ GST, other pieces fell into place gradually: MODVAT was extended to virtually the entire domain of central excises, the hundreds of end-use specific exemptions were chipped away, the large number of excise tax rates was whittled down, services taxation was introduced (in 1994) and rapidly expanded in scope and coverage, and, by 2000, major initiatives had been launched to reform State sales taxes into VAT format.
In this long (and not always linear) journey, a personal high point for me occurred during the preparations for Yashwant Sinha’s Budget of 1999/2000. As usual, the long meetings of the “Budget group” (finance minister, secretaries and CEA) on indirect tax policy were held in the specially secure, “engine room” of the Commissioner, Tax Research Unit of the Central Board of Excise and Customs (then the very able and reform-minded T R Rustagi). As we searched hard for ways to reduce the number of excise tax rates, I was able to help with some acceptable rules of thumb to collapse the extant eleven major excise tax rates (ranging from 5 to 40 per cent) into just three (8, 16 and 24 per cent), buttressed by two non-Modvatable additional special excises of 6 and 16 per cent on a handful of luxury consumer goods. The following year, 2000, the Budget group, led by Yashwant Sinha, conflated these three rates into a single CENVAT rate of 16 per cent, along with three non-rebatable special excises of 8, 16 and 24 per cent.
Of course, a great deal more had to happen in the years beyond 2000 to arrive at the landmark inception of GST on July 1, 2017. And compromises had to be made to amend the Constitution, enact the necessary legislation in Parliament and State Assemblies and retain consensus in the GST Council over the past year. But the story of India’s fledgling GST goes back a long way before 2000. And I was privileged to play a small part in that story.
Source: Business Standard