Nearly seven decades after India’s independence, the country has yet to become a single market for goods and services. Trade between states is subject to tariffs, and both the federal as well as state governments levy a myriad of taxes discouraging production and inter-state commerce. Prime Minister Narendra Modi’s government has been attempting to change this with a big-ticket reform aimed at modernizing the nation’s arcane tax code. If Modi succeeds, it would mark a major achievement of his premiership and contribute to his core electoral promise of reinvigorating the economy. A growth-boosting reform The government wants to introduce a national sales tax, dubbed the goods-and-services tax (GST), which would replace more than a dozen types of federal and state taxes. Successive governments have tried and failed to implement the GST over the past decade. “India currently suffers from a highly fragmented, multi-layered and complex indirect tax system,” said Sumedh Deorukhkar, Asia economist at BBVA Research. “The GST is a nationwide value-added tax that will subsume most indirect taxes in India, enable voluntary tax compliance due to input tax credit and facilitate investment decisions independent of tax considerations,” he added. But introducing it requires amending India’s constitution, which needs the… Read full this story
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