New tax era in India

Tax reform long overdue but traders protest system’s details

India launched its biggest ever fiscal reform with the government promising a stronger, less corrupt economy while businesses are nervous about what this entails.

NEW DELHI: India launched its biggest ever fiscal reform with the government promising a stronger, less corrupt economy while businesses are nervous about the new tax.

The goods and services tax (GST) replaces more than a dozen levies imposed nationally and by the 29 states.

It aims to transform the nation of 1.3 billion people and its US$2 trillion (RM8.59 trillion) economy into a single market.

Prime Minister Narendra Modi held a special midnight session of parliament to launch GST which he called “a good and simple tax”.

“With GST, the dream of one India, great India, will come true,” the prime minister said.

“GST is a simple, transparent system which prevents generation of black money and curbs corruption,” said Modi who jolted the country last year by withdrawing more than 85% of India’s bank notes from circulation in a clampdown on under-the-table dealings.

“The system gives opportunity to honesty and people who do honest business.”

But the prime minister, who has put huge efforts into the economy as he targets re-election in 2019, acknowledged that it would have teething problems.

Jammu and Kashmir state has refused to sign onto the one tax regime, and GST has sparked protests by traders, while the main opposition Congress Party boycotted the launch ceremony.

Businesses are nervous about the imposition of GST, which sets out four different rates of between five and 28% instead of the one originally envisioned.

The GST rule book runs to more than 200 pages and last-minute changes were still being made late yesterday.

Many are worried because while returns have to be filed by computer, they do not have or do not understand computers.

Most economists agree the reform is long overdue, but warn the initial shock to the economy is likely to drag, rather than stoke growth, as businesses adjust.

— Reuters Miffed over tariff: Women wearing aprons bearing anti- GST messages attending a protest organised by India’s main opposition Congress party in Ahmedabad.