In­dia’s new tax sys­tem to up eco­nomic growth

The Star Early Edition - - INTERNATIONAL - Dou­glas Busvine and Manoj Ku­mar

BUSI­NESS­MAN Pankaj Jain is so wor­ried about the im­pend­ing launch of a new sales tax in In­dia that he is think­ing of shut­ting down his tiny tex­tile fac­tory for a month to give him­self time to ad­just.

Jain is one of mil­lions of small busi­ness own­ers who face wrench­ing change from In­dia’s big­gest tax re­form since in­de­pen­dence that will unify the coun­try’s $2 tril­lion (R25.9 tril­lion) econ­omy and 1.3 bil­lion peo­ple into a com­mon mar­ket.

But he is sim­ply not ready for a regime that from July 1 will for the first time tax the bed linen his 10 work­ers make, and re­quire him to file his taxes ev­ery month on­line.

On the desk in his tiny of­fice in Meerut, two hours drive north­east of New Delhi, lay two cal­cu­la­tors.

Turn­ing to open a metal cabi­net, he pulled out a hand-writ­ten ledger to show how he keeps his books.

“We will have to hire an ac­coun­tant – and get a com­puter,” the thick­set 52 year old said, as a dozen old power looms clat­tered away in the ram­shackle work­shop next door.

Prime Min­is­ter Naren­dra Modi’s govern­ment says that by re­plac­ing sev­eral fed­eral and state taxes, the new Goods and Ser­vices Tax (GST) will make life sim­pler for busi­ness.

To drive home the point, Bol­ly­wood su­per­star Amitabh Bachchan has ap­peared in a pro­mo­tional video in which he weaves a cat’s cra­dle be­tween the fin­gers of his hands, which sym­bol­is­ing In­dia’s thicket of old taxes.

With a flour­ish, the tan­gle is gone and Bachchan pro­claims: “One na­tion, one tax, one mar­ket!” (

By tear­ing down bar­ri­ers be­tween In­dia’s 29 states, the GST should de­liver ef­fi­ciency gains to larger busi­nesses. HSBC es­ti­mates the re­form could add 0.4 per­cent to eco­nomic growth.

Yet at the lo­cal chap­ter of the In­dian In­dus­tries As­so­ci­a­tion, which groups 6 500 smaller en­ter­prises na­tion­wide, the talk is about how to cope in the af­ter­math of the GST roll­out.


In­dian Prime Min­is­ter Naren­dra Modi is im­ple­ment­ing tax re­forms and the roll­out of a goods and ser­vices tax.

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