Summary and analysis of the First Discussion Paper on GST (2009)

Summary and analysis of the First Discussion Paper on GST (2009) — here we have captured both the technical structure and the strategic intent of the proposal, while also linking it to the later evolution of GST in IndiaIndia Hind/ hend >hindia. Bharat Varsha (Jambudvipa used in Mahavamsha) is the name of this land mass. The people of this land are Sanatan Dharmin and they always defeated invaders. Indra (10000 yrs) was the oldest deified King of this land. Manu's jurisprudence enlitened this land. Vedas have been the civilizational literature of this land. Guiding principles of this land are : सत्यं वद । धर्मं चर । स्वाध्यायान्मा प्रमदः । The place also been called Hindusthan in Pesia. The word Hendu is mentioned in Avesta. Read more.

“There is ample evidenceEvidence All the means by which a matter of fact, the truth of which is submitted for investigation, is established or disproved. Bharatiya Sakshya (Second) Adhiniyam 2023 to suggest that logistical costsCosts Subject to any written law, costs are at the discretion of the Court, and the Court has the power to determine all issues relating to the costs of or incidental to all proceedings, including by whom and to what extent the costs are to be paid, at any stage of the proceedings or after the conclusion of the proceedings. Generally “Costs” includes charges, disbursements, expenses, fees, and remuneration. Costs in any matter are payable from the date of the order of the Court unless the parties otherwise agree. The costs of a third-party funding contract are not recoverable as part of the costs of, or costs. within India are high. One study suggests that, for example, in one day, trucks in India drive just one-third of the distance of trucks in the US (280 km vs 800 km). This raises direct costs (wages to drivers, passed on to firms), indirect costs (firms keeping larger inventory), and location choices (locating closer to suppliers/customers instead of the lowest-cost location in terms of wages, rent, etc.). Further, only about 40 per cent of the total travel timeTime χρόνος. Judicial: Where any expression of it occurs in any Rules, or any judgment, order or direction, and whenever the doing or not doing of anything at a certain time of the day or night or during a certain part of the day or night has an effect in law, that time is, unless it is otherwise specifically stated, held to be standard time as used in a particular country or state. (In Physics, time and Space never exist actually-“quantum entanglement”) यमः , पुं, (यमयति नियमयति जीवानां फलाफलमिति । यम् + अच् । विश्वे च कलयत्येव यः सर्व्वायुश्च सन्ततम् । अतीव दुर्निवार्य्यञ्च तं कालं प्रणमाम्यहम् ॥यमैश्च नियमैश्चैव यः करोत्यात्मसंयमम् । स चादृष्ट्वा तु मां याति परं ब्रह्म सनातनम् ॥ is spent driving, and checkpoints and other officialOffice Αξίωμα > Officer > Office-bearer (1593) > Opus, officium, ex officio (Latin). Box-office (Cash Box). stoppages take up almost one-quarter of the total travel time. Eliminating checkpoint delays could keep trucks moving almost 6 hours more per day, equivalent to an additional 164 km per day – pulling India above the global average and to the level of Brazil. So, logistics costs (broadly defined, and including firms’ estimates of lost sales) are higher than the wage bill or the cost of powerPower The amount of energy transferred or converted per unit of time. In the International System of Units, the unit of it is the watt, equal to one joule per second. The capacity of energy infrastructure is rated using watts, which indicate its potential to supply or consume energy in a given period of time. A Power-plant rated at 100 MW has the potential to produce 100 MWh if it operates for one hour., and 3-4 times the international benchmarks”.

Here’s a structured refinement, highlighting core takeaways, analytical depth, and context:

1. Context and Significance

Background: Released by the Empowered Committee of State Finance Ministers (Nov 10, 2009), this was the first official blueprint for India’s GST regime.
Vision: Move from fragmented indirect taxes (VAT, excise, service tax, CST, etc.) toward a harmonized, destination-based tax system covering both goods and services.
Federal Balance: Designed as a dual model (CGST + SGST) to preserve the fiscal autonomy of both the Centre and the States.

Analytical Note: The document marks the first real political consensus-building effort. Unlike VAT, which was state-driven, GST demanded deep Centre–State cooperation through constitutional change.

2. Key DesignDesign In India, design protection initially lasts for 10 years and can be extended for another 5 years i.e. protection can last for a maximum of 15 years. Features of Proposed GST

Dual GST Structure

CGST – levied/administered by Centre.
SGST – levied/administered by States.
IGST – for inter-state transactions, enabling seamless ITC across borders.

Critical Design Element: Restriction on cross-utilization of credits (CGST credit cannot offset SGST liability, and vice versa) – simplifying administration but limiting efficiency.

Thresholds & Schemes

SGST threshold: ₹10 lakh turnover.
CGST threshold: ₹1.5 croreCrore एक करोड़: It denotes ten million (₹ 10,000,000) and is equal to 100 lakh in the Indian numbering system. 100 crores = 1 billion (1000 million) for goods (to shield small businesses).
Composition scheme: Simplified tax for small entities up to ₹50 lakh.

Compliance Infrastructure

PAN-linked TIN system for taxpayer identification.
Emphasis on IT backbone for returns, credits, and settlements (foreshadowing GSTN).

3. Subsumed and Excluded Taxes

Central Taxes to be Subsumed

Excise, Service Tax, CVD, SAD, additional duties, surcharges/cesses.

State Taxes to be Subsumed

VAT, Sales Tax, Entertainment Tax, Luxury Tax, Betting/Gambling Tax, Entry Tax (non-Octroi).

Exclusions

AlcoholAlcohol It is a psychoactive substance (WHO). Ethanol/ethyl alcohol/alcohol >The alcoholic beverage industry has generally agreed not to use synthetic ethanol manufactured from ethylene in alcoholic beverages, due to the presence of impurities. Ethanol is a primary alcohol (C2H6O) that is ethane in which one of the hydrogens is substituted by a hydroxy group. It has a role as an antiseptic drug, a polar solvent, a neurotoxin, a central nervous system depressant, and a teratogenic agent. Alcohol's effects include: How much do you drink? How often do you drink? Your age? Your sex? Your genetics? Your overall health? Family history of alcohol problems.: kept outside GST → States retain major revenue source.
Petroleum products: excluded initially, with future review.
Tobacco: under GST, but Centre allowed an additional excise levy.

Analytical Note: These exclusions reflected political economy compromises. They would later remain contentious — e.g., petroleum is still outside GST (2025).

4. Justification and Economic Rationale

Remove cascading: VAT only partially achieved this; GST to complete it by integrating goods and services.
Wider tax base: Comprehensive ITC improves compliance.
Competitiveness: Lower costs, improved efficiency, stronger exportExport How to export: Canada-India-USA performance.
Simplification: Fewer overlapping levies.
Phase out CST: Removing barriers to inter-state trade → critical for a “common market.”

5. Challenges Identified

Constitutional Amendment – essential to give States power over services and Centre power over sales.
Revenue Loss & Compensation – especially from CST phase-out; required a 5-year compensation framework.
IT Infrastructure – central to IGST settlement and credit flow.
Legislative Coordination – drafting uniform state/central laws and procedures.

Analytical Note: These were not minor hurdles — in factFact Something तथ्य (In-formation) that truly exists or happens or some-thing that has actual existence. Circumstances: a fact or event that makes a situation the way it is. Indian Evidence Act: It means and includes— (i) anything, state of things, or relation of things, capable of being perceived by the senses; (ii) any mental condition of which any person is conscious. “facts in issue” means and includes any fact from which, either by itself or in connection with other facts, the existence, non-existence, nature or extent of any right, liability or disability, asserted or denied in any suit or proceeding, necessarily follows., they explain why GST, proposed for April 2010, only materialized in July 2017.

6. Broader Economic Context (2009–2010)

India is positioned as a high-growth, stable economy amidst global turbulence.
Reforms like GST were seen as credibility-enhancing, signaling India’s readiness to integrate with global economic systems.
International comparisons: Unlike most VAT regimes, India’s GST was unprecedented in scale and complexity:
- Australia/Germany – centralized systems (limited state autonomy).
- Brazil/Argentina/RussiaRussia Main Cities: Moscow Saint Petersburg Novosibirsk Yekaterinburg Nizhniy Novgorod Samara Omsk Kazan Rostov-na-Donu Chelyabinsk Ufa Volgograd Perm Krasnoyarsk Saratov Voronezh Tol'yatti Krasnodar Ulyanovsk Izhevsk Yaroslavl Barnaul Vladivostok Irkutsk Khabarovsk Khabarovsk Vtoroy Orenburg Novokuznetsk Ryazan' Tyumen Lipetsk Penza Naberezhnyye Chelny Kalininskiy Astrakhan Makhachkala Tomsk Kemerovo Tula Kirov Cheboksary Kaliningrad Bryansk Ivanovo Magnitogorsk Kursk Tver Nizhny Tagil Stavropol' Ulan-Ude Arkhangel'sk Belgorod Kurgan Kaluga Krasnogvargeisky Sochi Orel Volzhskiy Smolensk Murmansk Vladikavkaz Cherepovets Vologda Vladimir Chita Saransk Surgut Tambov Yoshkar-Ola Taganrog – fragmented dual systems with poor coordination.
- Canada/India (pre-GST) – limited coordination but not seamless.
- India’s proposed GST – sought to combine federal fiscal autonomy with nationwide harmonization, making it arguably the most ambitious VAT/GST reform in the worldWorld Κόσμος .

7. Legacy AND DevelopmentDevelopment ανάπτυξη

The 2009 First Discussion Paper was visionary but also pragmatic — laying out the dual model, anticipating revenue concerns, and embedding IT as the backbone.
Many elements were carried into the 2017 GST lawLaw νόμος: Positive command of sovereign or divine. One can be ruled either by a Statute, a Statue, or a Statement. Legislation is the rule-making process by a political or religious organisation. Physics governs natural law. Logical thinking is a sign of a healthy brain function. Dharma is eternal for Sanatanis. Judiciary > Show me the face, and I will show you the law. Some people know how to bend the law rather than break it. Law Practice. Read a scholarly article (CGST, SGST, IGST, ITC chain, subsumed taxes).
Exclusions and threshold debates remain live issues even today.
In hindsight, this paper represents the “birth certificate” of GST in India.
The GST Council (India) was of the view that the changes in GST rates of goods and services need to be implemented with effect from 22 September 2025.
Reduction of GST from 12% OR 18% to 5% on almost all of the food items such as packaged namkeens, Bhujia, Sauces, Pasta, Instant Noodles, Chocolates, Coffee, Preserved Meat, Cornflakes, Butter, Ghee, etc. Reduction of GST from 28% to 18% on AirWind Ανεμος . वायुः पुं > Similar श्वसनः स्पर्शनः मातरिश्वा सदागतिः पृषदश्वः गन्धवहः गन्धवाहः अनिलः आशुगः समीरः मारुतः मरुत् जगत्प्राणः समीरणः नभस्वान् वातः पवनः पवमानः प्रभञ्जनः अजगत्प्राणः खश्वासः वाहः धूलिध्वजः फणिप्रियः वातिः नभःप्राणः भोगिकान्तः स्वकम्पनः अक्षतिः कम्पलक्ष्मा शसीनिः आवकः हरिः वासः सुखाशः मृगवाहनः सारः चञ्चलः विहगः प्रकम्पनः नभःस्वरः निश्वासकः स्तनूनः पृषतांपतिः । Vedic Deity. Solar wind is a stream of charged particles, consists mostly of electrons and protons with energies (1 keV). Pranayama= controlling breathe.-conditioning machines, TVs~32 inch (all TVs now at 18%), Dishwashing machines, Small cars, Motorcycles equal to or less than 350 CC

The Goods and Services Tax Appellate Tribunal (GSTAT) will be made operational for accepting appeals before the end of September 2025 and will commence hearing before the end of December this year. The Council also recommended the date of 30.06.2026 for the limitation of filing of backlog appeals. The Principal Bench of the GSTAT will also serve as the National Appellate Authority for Advance Ruling. These measures will significantly strengthen the institutional framework of GST by providing a robust mechanism for dispute resolution, ensuring consistency in advance rulings, and offering greater certainty to taxpayers. This will further enhance trustTrust It originated and was reduced to practice under the jurisdiction of courts by the civil law, was expanded and developed in the courts of chancery, and has been employed in nearly every field of human activity. The fundamental nature of a trust is the division of title, with the trustee being the holder of legal title and the beneficiary that of equitable title. By definition, the creation of a trust must involve a conveyance of property. > Trust Deed ∫ Having trust/faith/confidence in something, transparency, and ease of doing business under the GST regime.