Indian parliament passes key tax reforms

The Indian government has been successful to pass the much awaited Goods and Services Tax bill through the parliament, which is considered by many as the most significant reform since the 90’s. The bill has been debated by parliamentarians for almost a decade. The bill will replace the current complex structure of national, state and local levies with a single unified value-added tax system. The bill is so significant that the economists expect it to boost GDP by 1.5-2 percent, once fully implemented. It would also help India to become a global manufacturing hub.

The corporates are all excited about it as they would be able to claim tax credits already paid by their vendors. For example, a vendor sells a material ‘A’ at $100 to a corporate and pays a 10 percent tax which amounts to $10. The corporate then enhances the material ‘A’ to ‘A1’ and sells the product at $150. And it pays a 10 percent tax but under the new regime, since the $10 tax has already been paid the corporate would have to pay just $5. The bill would also make it easier to move across the states, which as of now is a very big issue and hindrance.

Now, the biggest challenge is to implement this tax reforms. The government has set a deadline of next financial year, which is April 2017.