NEW DELHI (Diya TV) — India’s Parliament Monday approved the country’s largest overhaul of indirect taxes after the lower house ratified a constitutional amendment Prime Minister Narendra Modi called a major step to make doing business easier.
The proposed goods and service tax (GST), is one of the most significant reforms the country has ever seen since it opened its economy a quarter-century ago. India first revamped its tax system in 1947, the same year it became an independent nation.
The measure seeks to harmonize a mosaic of state and central levies into a national sales tax, creating a single customs union widely expected to reduce business transaction costs, with potentially significant long-term growth benefits. After being stuck in the upper house for months, the measure was passed last week.
Modi hailed the passage as a “great step by team India, (a) great step towards transformation, great steps towards transparency.”
“Today, an important move to free the nation from tax terrorism has begun,” he told lawmakers in the lower house of parliament.
This advancement becomes the largest legislative victory for Modi since he assumed his role as Prime Minister in 2014 with the promise of nursing the country’s failing economy back to health. His plans to simplify rules for land sales was ripped apart in parliament last year. On a similar note, political opposition forced Modi to put on hold his proposed legislative changes aimed at making it easier for companies to hire and fire workers.
Under the new code, companies will receive offsets for taxes paid at different stages of the supply chain, helping them to avoid the penalties of double-taxation. India’s Finance Ministry have pegged next April as the projected window to roll out the new GST. Meeting the self-imposed deadline, however, will be a race against time, tax experts say.
The bill now needs the approval of half of India’s state legislatures and federal and state legislatures must pass three laws to implement the tax.
