The history of Sales tax in India begins from 1938. During the pre-independence days the Provinces in British India were empowered under the Government of India Act, 1935 to levy taxes on the sale of goods and on the advertisements, as per Entry 48 in list II of the VIIth Schedule of the Act.

At the same time the Princely State had sovereign legislative powers to promulgate their own laws for the levy of tax on the transaction of sale of goods. The first Province in India to levy a tax on sale of goods by exercising powers of the Government of India Act 1935, was Central Provinces and Berar (renamed Madhya Pradesh after Independence), which in 1938 levied a tax on the retail sale of motor spirit and lubricants.

This levy however was only a selective Sales tax. The Province of Madras was the poineer province in India in the matter of introducing a scheme of General Sales tax. Madras introduced a General Sales tax in 1939 on multipoint system. In 1941 Bengal followed a single point system. In the same year Punjab commenced General Sales tax on multi point system. Shortly after this, almost all the Provinces and some of the Princely States introduced Sales tax in one form or other.   More detail...