India unveils streamlined tax scheme

Global Business

India unveils streamlined tax scheme 2

Indian Prime Minister Narendra Modi most ambitious reform is tackling India’s outdated tax system, which gathering real momentum after being approved by parliament last week. The government said the so-called goods and services tax will make doing business in India a lot easier. While some claim it will raise inflation when it’s implemented because the price of some goods will rise, it will eventually boost business activity.

CCTV America’s Ahmad Coo reports.

India unveils streamlined tax scheme

India unveils streamlined tax scheme

Indian Prime Minister Narendra Modi most ambitious reform is tackling India’s outdated tax system, which gathering real momentum after being approved by parliament last week. The government said the so-called goods and services tax will make doing business in India a lot easier. While some claim it will raise inflation when it’s implemented because the price of some goods will rise, it will eventually boost business activity. CCTV America’s Ahmad Coo reports.

The saying ‘money makes the world go round’ probably has been around since the creation of money. But that’s probably not the case in India- especially for furniture maker Vivek Mehra. To him, if there’s anything money does effectively in India- it actually slows down businesses.

He blamed the government’s use of an antiquated, multi-layered and confusing tax system to raise money. It’s a jumble of strategies by federal and local governments. It’s common to have a product taxed several times before it hits the market.

Prime Minister Narendra Modi seized on that frustration during his push for power and made it one of the centerpieces of his campaign. He vowed to throw out the patchwork tax system and replace it with the Goods and Services tax. It took Modi more than two years to get the G-S-T approved. That’s no small feat, since parliament is dominated by a rival party.

“Through the GST (Goods and Services Tax), we will see one of the greatest tax reforms in the country. And it simplifies the tax structure instead of a multiface tax it will be a one-single point tax, it will be a single rate that we will probably move towards over a period of time,” Chandrajit Banerjee, the director general of Confederation of Indian Industry said. “So it’s an entire taxation architecture which makes it simple, but very importantly it also makes India into one market, a unified one market.”

Some of the most influential business groups claimed it could add as much as two percentage points to the country’s yearly growth rate. That could help India- which is already the fastest growing major economy in the world pull further ahead. Still, others are tempering expectations.

Mehra also said most of the people are confused because nobody knows what’s going to finally happen. So till the time it comes, it will take some time for everybody to get like the gist of it, what it’s going to be like.

The GST bill still has to be approved by at least half of 29 states. The government is hoping to implement it by April of next year, but even that may be a bit too optimistic. A new tax arrangement means training for tax officials, overhauling the country’s IT systems and getting used to the new changes.


Peter Kohli on the importance of the goods and services tax

For more on India’s goods and services tax and the future of the economy under Prime Minister Narendra Modi, CCTV America’s Rachelle Akuffo interviewed Peter Kohli, the chief investment officer at D-M-S Funds.