IN­DIA HAS HUGE GST CHAL­LENGES

New sys­tem, slated to be ef­fec­tive July 1, will re­place at least 17 state and fed­eral levies

New Straits Times - - Business -

MUM­BAI bat­tle to win over the coun­try’s pow­er­ful states and frac­tious fed­eral par­ties.

De­signed to free up trade, foster tax com­pli­ance and make it eas­ier to do busi­ness in the world’s fastest grow­ing ma­jor econ­omy, the GST is sched­uled to go into ef­fect on July 1.

“It has been a huge chal­lenge with count­less man hours,” said Price­wa­ter­house­Coop­ers LLP in­di­rect taxes part­ner Anita Ras­togi.

“The July 1 tar­get is look­ing fea­si­ble. And the ef­fort that has been put in is worth it be­cause this will lead to greater tax com­pli­ance and bet­ter ef­fi­ciency.”

Un­til now, a prod­uct or ser­vice in In­dia is taxed mul­ti­ple times at dif­fer­ent rates as com­po­nents are added and shipped be­tween states. Ev­ery­day more than 20,000 truck driv­ers wait in queues up to 3km long to pay an

Aus­tralia, with a pop­u­la­tion of 24 mil­lion peo­ple and a land mass larger than In­dia, re­lies on for­eign in­vest­ment to spur growth. While Prime Min­is­ter Mal­colm Turn­bull’s gov­ern­ment blocked two key pur­chases by Chi­nese firms last year, cit­ing na­tional se­cu­rity, the re­port showed that the vast ma­jor­ity of deals were ap­proved.

“There are signs of a grow­ing ma­tu­rity by Chi­nese in­vestors in the Aus­tralian mar­ket,” said the re­port in its key find­ings. en­try fee at 122 New Delhi check­points, food rot­ting, tem­pers fray­ing, costs ris­ing.

The new levy will ap­ply at the fi­nal point of con­sump­tion, re­duc­ing the cas­cad­ing ef­fect of taxes on tax, al­low­ing pro­duc­ers to eas­ily claim cred­its and min­imis­ing the op­por­tu­nity for corruption. Those trucks at the New Delhi bor­der? They’ll see their wait­ing time at check points drop by half, ac­cord­ing to econ­o­mists at No­mura Hold­ings Inc.

Prime Min­is­ter Naren­dra Modi’s gov­ern­ment said in­tro­duc­tion of the tax might bol­ster growth by as much as two per­cent­age

“The num­ber of joint ven­tures is in­creas­ing with more re­peat in­vest­ments by es­tab­lished Chi­nese firms. This has set a foun­da­tion for growth in fu­ture in­vest­ment.”

Com­mer­cial real es­tate re­mained the largest sec­tor, at­tract­ing 36 per cent of Chi­nese in­vest­ment, fol­lowed by in­fra­struc­ture with a record 28 per cent in­clud­ing the pur­chases of As­ciano Ltd and the Port of Mel­bourne, ac­cord­ing to the re­port. Bloomberg points.

Fi­nance Min­is­ter Arun Jait­ley said the tax re­form could see In­dia grow at more than eight per cent while a re­cent re­search paper from the United States Fed­eral Re­serve said the change could boost real gross domestic prod­uct by as much as 4.2 per cent, de­pend­ing on how high the tax rates are. The lower the rates, the big­ger the boost, said the paper.

A GST for In­dia will in ef­fect cre­ate one of the world’s big­gest free trade ar­eas. Its pop­u­la­tion of 1.3 bil­lion is more than that of the US, Europe, Canada and Aus­tralia com­bined and more states than the Euro­pean Union’s 28 mem­bers.

The tax will re­place at least 17 state and fed­eral levies on ev­ery­thing from elec­tric­ity to Gucci hand­bags to bor­der cross­ings. The GST will sweep those away and har­monise the in­di­rect tax sys­tem across the na­tion.

In­dia’s tax will com­prise four ba­sic rates: five, 12, 18 and 28 per cent. While of­fi­cials are yet to re­veal fi­nal de­tails of what will fall into each bracket, Fi­nance Min­is­ter Arun Jait­ley said 50 per cent of items in the re­tail in­fla­tion bas­ket won’t be taxed to pro­tect con­sumers. Bloomberg

BLOOMBERG PIC

In­dia is set to grow at more than eight per cent via the tax re­form and the change may boost real gross domestic prod­uct by as much as 4.2 per cent.

BLOOMBERG PIC

Com­mer­cial real es­tate re­mains the largest sec­tor, at­tract­ing 36 per cent of Chi­nese in­vest­ment, fol­lowed by in­fra­struc­ture with a record 28 per cent in Aus­tralia.

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