NEW DELHI, July 1 (Xinhua) -- India early Saturday rolled out its biggest ever tax reform in its 70-year history after achieving independence from British rule in 1947.
The new tax regime known as Goods and Services Tax (GST) replaces more than a dozen state and federal levies to unify an economy of 2 trillion U.S dollars and 1.3 billion people into a single market.
"GST would lead to a modern tax administration which is simpler, more transparent, and helps curb corruption," Indian Prime Minister Narendra Modi in his address ahead of launching GST said.
GST is a comprehensive indirect tax on manufacture, sale and consumption of goods and services across India, replacing existing indirect taxes levied by the federal and state governments. It is a destination-based, value added taxation system proposed as dual levy.
Prior to implementation of GST there was no uniformity on tax across India as duties and fees were levied at different rates across India's different states.
"The new law will bring a uniformity of taxes - one country, one tax - and it is expected to make things easier for doing business among different states," said Imtiaz Ahmad, a tax consultant. "States will now be bound to levy tax as per federal directive, for the new law has ended the state's fiscal autonomy."
With the implementation of new tax regime all goods and services will be placed in four basic rates - 5 percent (for essential items), 12 percent and 18 percent (for Standard goods and services) and 28 percent (for luxury and sin tax items). Most agricultural and food products will attract zero percent tax.
Each product will now attract a single tax rate across India.
Experts say the GST will improve India's gross domestic product growth.
Modi, during his recent visit to the United States, wrote in the Wall Street Journal that a "unified, continent-sized" Indian market would make it much easier for foreign businesses to invest.
GST was first proposed in 2003, but the idea could not take off in wake of stiff opposition from opposition parties. Bharatiya Janata Party (BJP) and Modi before coming to power were sharply opposing the GST.
Although the tax reform will have a long term benefit, however, the rollout at present seems to be in disarray.
With opposition from political parties outside government, the business community says it was not given enough time to prepare for the new change and comply with the new system.
"So far none from sales tax office has come to us to make us aware about this GST ," Rakesh Shukla, a stationary shop owner at New Delhi's Gautam Nagar said. "What I understand is this new law will increase the paperwork, which is highly irritable for all the businessmen."
Even there are unfounded assertions that the prices of goods would increase.
"For filing the returns and to get acquainted with new system, I have to hire services of an accountant and save every paper slip," said Shukla. "Last year it was the ghost of demonetization and this year it's GST. I fail to understand why this government doesn't plan things properly."
But the new law has not been implemented in Indian-controlled Kashmir. where the local government is struggling hard to get opposition parties and other stakeholders on board.
Traders in Muslim majority areas of the region on Saturday observed a daylong strike to oppose GST.
Police have detained a trade leader along with his dozen supporters in Srinagar for leading a protest demonstration against GST in Indian-controlled Kashmir. The traders feel implementation of GST will erode the financial and political autonomy of the restive region.
Meanwhile, India's former finance minister P Chidambaram Saturday said GST would put a burden on the common men and hugely affect small, medium and micro businesses and entrepreneurs, besides being inflationary with multiple rates.
"There will be inflation. What is the government going to do about it?" Chidambaram said. "Small, medium and micro scale entrepreneurs and traders will be affected in a big way because they are not ready for the roll out of the new law." Enditem
A single purchase
