Skip to content
Search

Latest Stories

India launches tax revolution amid business doubts

India on Saturday (1) launched its biggest ever fiscal reform with the government promising that a new nationwide tax would make the economy stronger and less corrupt, but businesses are nervous about the revolution.

The new goods and services tax (GST) replaces more than a dozen levies imposed nationally and by the 29 states. It aims to transform the nation of 1.3 billion people and its $2 trillion economy into a single market.


Prime minister Narendra Modi held a special midnight session of parliament to launch GST which he called "a good and simple tax".

"With GST, the dream of one India, great India, will come true," the prime minister said.

"GST is a simple, transparent system which prevents generation of black money and curbs corruption," said Modi, who jolted the country last year by withdrawing more than 85 per cent of India's bank notes from circulation in a clampdown on under-the-table dealings.

But the prime minister, who has put huge efforts into the economy as he targets re-election in 2019, acknowledged there would be teething troubles.

Jammu and Kashmir state has refused to sign onto the one tax regime. GST has sparked protests by traders, while the main opposition Congress Party boycotted the launch ceremony.

Businesses are nervous about GST, which sets out four different rates of between five and 28 per cent instead of the one originally envisioned.

The GST rule book runs to more than 200 pages and last-minute changes were still being made late Friday (30).

It allows local authorities to impose some taxes. The first fallout was seen Saturday when the southern state of Tamil Nadu announced a 30 per cent levy on movie tickets, in addition to the 28 per cent GST fee.

All 969 movie cinemas in the state will close from Monday (3) in protest, M. Subramanian, president of a regional theatre owners association, said.

"Because of this we will lose customers and it will encourage illegal downloads of movies," he said. "We will continue the strike till this 30 per cent tax is removed."

"That's the risk you have when you don't subsume all the taxes," said Pratik Jain, Partner and Leader Indirect Tax, PwC India. "It defeats the purpose of one tax."

Other sectors were hit as well with a higher tax rate.

Lighting store Kherati Lall Sons in central Delhi was empty Saturday afternoon.

"Taxes have gone up for us from 12.5 per cent to 28 per cent," company director Shanti Kumar Rakyan said. "This is a huge change and it's really going to hit our sales."

But business was booming for the transport companies.

An executive for logistics company Rivigo in Mumbai, who declined to be named, said clients had asked them to ensure that the goods reached their warehouses before midnight when the new tax would kick in.

Textile traders and other sectors went on strike ahead of the launch and many businesses say they are unclear about what to charge.

Bhartiya Udyog Vyapar Mandal, a national traders association that claims 60 million members, called a one-day strike Friday to protest the GST.

Many are worried because while returns have to be filed by computer, they do not have or do not understand the technology.

"Since August last year we have put forward our demands on GST but the government has never responded," national secretary general Vijay Prakash Jain said. "We told the government, either fix this, or we will strike."

Most economists agree the reform -- first proposed in 2006 -- is long overdue, but warn of an initial shock to the economy as businesses adjust.

Credit Suisse managing director in India Neelkanth Mishra warned that "the next few months will be a period of uncertainty in which no company would want to invest, that slows down the investment cycle and acts as a drag on the economy."

More For You

UK economy contracts unexpectedly in January

Chancellor Rachel Reeves speaks while holding roundtable discussion during a visit to RAF Waddington in eastern England. (Photo by YUI MOK/POOL/AFP via Getty Images)

UK economy contracts unexpectedly in January

BRITAIN's economy unexpectedly shrank in January, official data showed on Friday (14), piling more pressure on the Labour government ahead of its Spring Statement on the economy.

Gross domestic product contracted 0.1 per cent in the month after GDP rose 0.4 per cent in December, the Office for National Statistics (ONS) said in a statement.

Keep ReadingShow less
Pakistan seeks £3.4bn bank loan to tackle mounting energy sector debt

Pakistan’s government is the largest shareholder or owner of most power companies

Pakistan seeks £3.4bn bank loan to tackle mounting energy sector debt

Eastern Eye

PAKISTAN government is negotiating a 1.25 trillion Pakistani rupee (£3.4 billion) loan with commercial banks to reduce its bulging energy sector debt, the power minister and banking association said.

Plugging unresolved debt across the sector is a top priority under an ongoing $7bn (£5.4bn) International Monetary Fund (IMF) bailout, which has helped Pakistan dig its way out of an economic crisis.

Keep ReadingShow less
Deliveroo posts first annual profit after 12 years

A Deliveroo rider near Victoria station in London, England. (Photo by Dan Kitwood/Getty Images)

Deliveroo posts first annual profit after 12 years

FOOD DELIVERY app Deliveroo announced on Thursday (13) its first annual profit as orders and revenue rose, while the 12-year old company sees further growth despite exiting Hong Kong.

The milestone follows sizeable full-year losses owing to high investment costs since American Will Shu founded the company in 2013 and made Deliveroo's first delivery in London.

Keep ReadingShow less
JLR-Tata-Getty

JLR had initially planned to manufacture more than 70,000 electric vehicles at the facility. (Photo: Getty Images)

JLR halts plan to build EVs at Tata’s India plant: Report

JAGUAR LAND ROVER (JLR) has put on hold plans to manufacture electric vehicles at Tata Motors’ upcoming £775 million factory in southern India, according to a news report.

The decision was influenced by challenges in balancing price and quality for locally sourced EV components, three of the sources said. They added that slowing demand for electric vehicles was also a factor.

Keep ReadingShow less