Boost for business as India overhauls tax system
WHEN trader Vivek Mehra buys artwork from the remote corners of India, he braces himself for a world of pain as he navigates the country’s notoriously complex taxation system.
But Mr Mehra, who makes and sells furniture, is among throngs of business owners hopeful Prime Minister Narendra Modi’s moves last week for a new, single national sales tax will make life much easier.
At the moment, Mr Mehra has to pay different rates of sales tax in different states, a policy that means endless hold-ups when crossing interstate borders.
“You can be stranded behind 300 trucks at the border and even one single piece of paper missing can mean your load is confiscated,” he said.
Lawmakers have voted in favour of scrapping India’s jumble of federal and state taxes and introducing a single goods-and-services tax (GST), creating a common market.
The government said the move, hailed as India’s most significant economic reform in decades, would reduce double taxation, cut red tape and make the system more efficient.
Experts said the tax could eventually help boost India’s already strong economic growth by up to two percentage points.
“Consumption will go up, production will go up, investments will go up, investment into production will go up, so this is a great development,” said Adi Godrej, chair of consumer goods giant the Godrej Group.
“To my mind it is the biggest economic reform after the liberalisation of 1991,” he said, referring to historic moves to open up India to international trade. –