In World Economy News 15/01/2016
India’s government is hopeful it will be able to implement a single, nationwide sales tax by October, a top official said, as Prime Minister Narendra Modi struggles to break a political deadlock in Parliament that has put his legislative agenda on hold.
The introduction of the Goods and Services Tax has been on the watch list of investors, who see it as a game-changer for the country’s economy and ease of doing business there. It has also been billed as the biggest tax policy change since India’s independence in 1947.
“There is a political side to the Goods and Services Tax [GST], but the government is committed to implementing it this year. It doesn’t looks like being implemented before July or latest by October,” the official, who works closely with Mr. Modi and asked not to be named, said.
The government had earlier set a deadline of April for the implementation of the new tax.
The government estimates that the new tax structure, which seeks to consolidate a knotty web of federal and state taxes, will add up to 2% to the country’s gross domestic product.
The official said the government has a clear road map for the creation of infrastructure required to be able to collect the new tax.
“If we could implement the GST by October also, it will be one of the biggest achievements in more than six decades,” he said.
The legislative bill that seeks to amend the constitution, allowing the tax to be rolled out, has been awaiting the approval of lawmakers in Parliament’s upper house?where Mr. Modi’s government lacks a majority?since it was passed in the lower house in May.
Once the upper house votes for it, the bill will need the approval of at least half of India’s 29 states, which could happen within the next couple of months. A government panel in December suggested setting a standard GST rate at 17%.
The government has been pursuing the matter with the opposition Congress party and it is hopeful the bill will be passed in either the ensuing budget session, which starts in February, or the monsoon session, which starts in June, paving the way for its implementation by October.
Parliamentary proceedings have over the past few sessions been disrupted over alleged scandals involving senior members from both the ruling Bharatiya Janata Party and the opposition Congress Party.
The monsoon session of the Parliament last year was disrupted after the opposition demanded the resignation of senior BJP leaders for their alleged role in aiding a cricket tycoon under investigation for financial irregularities. The latest winter session, which ended in December, also turned out to be a washout amid a row over a court case involving members of the Congress party. Both the parties have denied any wrong doing by their members.
After Parliament and the states agree, the government will draft a GST law to introduce the unified taxes at both the federal and state levels.
