India is set to roll out a nationwide goods and services tax as part of efforts to boost economic growth.
India ’s lower house of parliament on Wednesday passed the Constitution Amendment Bill, which will make states and the central government work together to set tax rates, the Wall Street Journal reported.
Currently, states are allowed to set some of their own taxes, such as value-added taxes on goods, which now vary from state to state and product to product.
“It is unquestionably a very important moment,” Finance Minister Arun Jaitley said in parliament.
Some economists estimate the streamlined tax system could help boost India’s gross domestic product expansion by 2 to 3 percent in the subsequent years, the newspaper said.
The bill must be ratified by the upper house of parliament, where Prime Minister Narendra Modi’s Bharatiya Janata Party doesn’t have a majority of the seats.
The opposition Congress party walked out during the vote on Wednesday, after its demand that the bill be referred to a panel of parliamentarians for further scrutiny was rejected.
Once both houses accept the bill, it would need the approval of at least half of India’s 29 states, which could happen within the next few months.
The proposed tax system would give individual states less control and lower revenues. So to entice them to approve it, New Delhi has agreed to compensate states for revenues lost for the first five years after it is implemented.
After the parliament and the states agree on the bill, the government will draft a GST law to introduce unified taxes at both the federal and state levels to replace the overlapping local and national taxes.
The government intends to implement the new tax sysem from next April.
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