The passage of the GST is a watershed moment which marks the turning of the tide in support of meaningful economic reforms in India. From this great breakthrough will come the leeway, or loosening of the logjam, to facilitate even greater reforms in labor and land laws.
Hats off to Mr. Modi. Wish the skill to bring various political parties together was a transferable skill. That would benefit more than one world leader.
1
Better late than never. Well Done, India. I have a hard time believeing that the most corrupt Congress Party which is now in opposition, after being completley marginalized in the previous election, caved in. I guess they realized how naked and unprincipaled they looked and finally agreed to something that they should have supported from the git go.
What are the odds that India will not actually reduce the tax bureaucracy?
100%
100%
2
"Economist forecast " Very scary words. They, like meteorologist, are usually wrong, yet continue to get paid, like astrology. Alan Greenspan was considered a genius, until the fake housing market crumbled.
1
It is one of the rare occasions that NYT has something positive to say about India. Balanced reporting about the 1.3 billion people will help project a more positive image about a country which is the largest democracy in the troubled region much like Israel in the Middle East.
1
This is definitely a step in the right direction, but there is much more India needs to do to make it ready to move forward, take its rightful place among nations, and for full integration into the global economy.
While some Indians have access to adequate educational resources, many still do not. Given the size of India's population, even a small percentage lacking access to education means, in the aggregate, a large number of under educated people. Unfortunately, the percentage is not small, even in the larger cities. This group of under educated people, some of whom are severely so, will be an enormous continuing drag on India's future and must be addressed if India is truly going to move forward.
While some Indians have access to adequate educational resources, many still do not. Given the size of India's population, even a small percentage lacking access to education means, in the aggregate, a large number of under educated people. Unfortunately, the percentage is not small, even in the larger cities. This group of under educated people, some of whom are severely so, will be an enormous continuing drag on India's future and must be addressed if India is truly going to move forward.
2
Indians have a justifiable reason to feel elated that the noisy multiparty democracy has managed in convincing more than 30 administrations across the country to give up their autonomy to a large extent on taxation. It's a truly remarkable achievement. .
The GST is the greatest tax reform ever attempted by India. The constitutional amendment bill by a stroke of pen managed to Subsume: central excise duties, other excise duties, countervailing duty, service tax, special additional duty of customs, central surcharges and cesses (all levied by the Centre) and entertainment tax, central sales tax (levied by the centre, collected by the states), octroi and entry tax, purchase tax, luxury tax, taxes on lottery, gambling, and betting, state surcharges and cesses.
Simply said GST has managed to strike a fatal blow to the very fountain head of endemic corruption in India.
The GST is the greatest tax reform ever attempted by India. The constitutional amendment bill by a stroke of pen managed to Subsume: central excise duties, other excise duties, countervailing duty, service tax, special additional duty of customs, central surcharges and cesses (all levied by the Centre) and entertainment tax, central sales tax (levied by the centre, collected by the states), octroi and entry tax, purchase tax, luxury tax, taxes on lottery, gambling, and betting, state surcharges and cesses.
Simply said GST has managed to strike a fatal blow to the very fountain head of endemic corruption in India.
Congratulations Mr Modi - the tax simplification scheme will undoubtedly create growth and ease Merchant's cost of doing business and create greater competition.
For GST to be a success,India needs to build suitable infrastructure - the first thing is to begin is an accounting software. Tax rates should be low. What about luxury tax in hotels? is staying in two/three star hotels a luxury? One just needs a good night sleep ,and breakfast in a hotel,before he/she goes out for the normal work in another city. Can these routine things be called luxury? Is sleep a luxury? If cars become cheaper,it is of no use,as there is a cap of 10 years on diesel cars. Diesel cars become a junk after 10 years as per the environment law. The passage of GST may be a big victory for the government,but still miles of distance needs to be covered for GST to become a reality. One has to keep his fingers crossed,if the new indirect tax regime is rolled out from April 1,2017. The GST Bill is to be ratified by a majority of states - 15 out of 29. It can be called the biggest tax reform in India after the 1991 liberalisation.
1
I agree with the luxury tax on hotels. Foreign and domestic tourists cannot afford a high luxury tax for hotel stay. In addition to this luxury tax, the government also levy a surcharge like VAT (value added tax) on most services. India also needs to lower its interest rate, which is very high. The article said that the BJP, during the Congress's regime, opposed the GST and since the last election with a majority, it wants the GST legislation. That means, the BJP played politics, like other political parties.
Next step to national integration is a Uniform Civil Code which once again will be opposed by a Congress Party secular in name but pandering to the worst superstitions and prejudices of the religious minorities.
There is no need for blaming only the Congress Party for not framing the uniform civil code. When the BJP-led governments were in power, they promised a uniform civil code during the election campaign. But once elected, two non-Congress-led parties never tried to frame a uniform civil code. Currently, if the Modi government can pass various legislations, why didn't create a uniform civil code, instead of saying: "we have to consult with the all parties."
Too bad US cannot simplify taxes. Too many wealthy people are benefiting now - middle class pays.
In Russia, for example, after abandoning a messy US style income tax code, income tax is now a straight 13% for everyone.
In Russia, for example, after abandoning a messy US style income tax code, income tax is now a straight 13% for everyone.
1
What effect would the tax have on ordinary Indian residents? How hard will the GST hit them? Everything seems written from a business point of view.
It is not just a victory for Modi alone in overhauling its Tangled Tax System. It is a tremendous victory for Indian democracy and a shinning moment for reforms. The ruling national democratic alliance worked closely in a multi-partisan manner with the opposition in both houses of parliament to achieve these grand Tax reforms which will result in a simplification of tax filing for the first time since independence. The finance minister Arun Jaitley and the leaders of the opposition parties were pivotal in sinking their differences and coming together to accomplish this gigantic step towards progress. India could see accelerated progress and a higher GDP from this overhaul.
2
It is a good step forward. Skepticism about the
expected benefits is warranted. Any tax cut or reform
is accompanied by promises of growth. Bush tax was
premised on growth. what we got was housing bubble
and financial crisis. The benefits went to 1%. National tax
system will still require lot of paper work, tracking
transactions for each state so they can be reimbursed
by the center. There is always the possibility of low tax collection because of corruption. National income tax
is paid by only 3.5Million in a country of 1.3Billion.
Good luck!
expected benefits is warranted. Any tax cut or reform
is accompanied by promises of growth. Bush tax was
premised on growth. what we got was housing bubble
and financial crisis. The benefits went to 1%. National tax
system will still require lot of paper work, tracking
transactions for each state so they can be reimbursed
by the center. There is always the possibility of low tax collection because of corruption. National income tax
is paid by only 3.5Million in a country of 1.3Billion.
Good luck!
1
While this is nice news, it does nothing to assuage the ages-long class system discrepancies in India, namely between Brahmins, Kshatriyas, Vaishyas, Shudras, and Dalits; and religious intolerance amongst Hindus, Muslims, and Sikhs.
Imagine an India with such issues resolved.
Imagine an India with such issues resolved.
5
The political parties are always fighting each other and no reform may have been possible. There is no unifying national interest or a sense of community in parts of India.
While there are some major progressive initiatives most of the time the population acts as if there is no law and order. Some towns have very strict littering laws and rapid expansion of cities makes any progress inadequate.
There is corruption is very country and while it is an undesirable practice the adage that India is corrupt does not wash. In some ways Western ways enhance corruption encouraging greed and wiping out Gandhian ways.
Some folks believe democracy is too complicated and only a well enlightened population should adopt it.
While there are some major progressive initiatives most of the time the population acts as if there is no law and order. Some towns have very strict littering laws and rapid expansion of cities makes any progress inadequate.
There is corruption is very country and while it is an undesirable practice the adage that India is corrupt does not wash. In some ways Western ways enhance corruption encouraging greed and wiping out Gandhian ways.
Some folks believe democracy is too complicated and only a well enlightened population should adopt it.
1
I believe that if India wants to get rid of its corruption and other issues affecting its economy and the population, India should have a military or authoritarian government, or a government like the Singapore.
> Surjit Bhalla, a macroeconomic adviser .. the new tax regime to the industrial deregulation of 1991
this guy is a modi sucker, comparing GST to economic reform is silly. overall it is bound to negatively impact local businesses.
this guy is a modi sucker, comparing GST to economic reform is silly. overall it is bound to negatively impact local businesses.
1
Too bad! Majority of the MP's and economists thought otherwise. You have to wait and see how you are wrong in the meantime.
1
- 2014 modi hype, - 2016 budget hype.
cashed out of both. got a good track record of being right. keep buying hype, good for me.
cashed out of both. got a good track record of being right. keep buying hype, good for me.
To non-Indians reading the article: the new GST in India is to replace sales tax and excise tax for inter-state commerce. This does not replace personal income tax.
3
Sorry but I've got to address the notion of a "reverse Brexit", coined by some unnamed executive.
Reverse Brexit would mean India was joining the E.U.. While that's an audacious and intriguing proposal, it seems highly unlikely. A Reverse Brexit is what Scotland is probably going to do when it leaves Britain and rejoins the E.U..
We don't even know what ramifications the Brexit will have yet, as it hasn't happened. Some years after 2018 we'll have a good idea of the magnitude and nature of the disaster for its economy.
If India can retool their taxes and aid their economy, that'd be great, but I think their number one problem is overpopulation. During this tax rewrite they might have thought of a progressive tax on having more than two children per set of parents.
Reverse Brexit would mean India was joining the E.U.. While that's an audacious and intriguing proposal, it seems highly unlikely. A Reverse Brexit is what Scotland is probably going to do when it leaves Britain and rejoins the E.U..
We don't even know what ramifications the Brexit will have yet, as it hasn't happened. Some years after 2018 we'll have a good idea of the magnitude and nature of the disaster for its economy.
If India can retool their taxes and aid their economy, that'd be great, but I think their number one problem is overpopulation. During this tax rewrite they might have thought of a progressive tax on having more than two children per set of parents.
4
Dan Stackhouse
NYC
It's a metaphor!
NYC
It's a metaphor!
4
"Reverse Brexit would mean India was joining the E.U.."
You are being too literal. The intended analogy is weak, but it appears to mean that Indian states will all use a common tax system, which will facilitate interstate commerce. The EU requires EU members to pay a VAT:
https://en.wikipedia.org/wiki/European_Union_value_added_tax
You are being too literal. The intended analogy is weak, but it appears to mean that Indian states will all use a common tax system, which will facilitate interstate commerce. The EU requires EU members to pay a VAT:
https://en.wikipedia.org/wiki/European_Union_value_added_tax
Seriously? Taxes on children? Who are you? I would like to know your opinion on Child Tax Credits in the US.
In the passage of GST bill, we must give credit to the progressive evolution of consensus democracy in India, the application of consensus decision-making to the process of legislation in a democracy.
It is a decision-making structure taking into account as broad a range of opinions as possible, as opposed to systems where minority opinions can potentially be ignored by vote-winning majorities.
Indian democracy to its credit has proved to be the type of constitutional democracy that operates to prevent quick and easy majority decision making and implementation.
The numerous checks and balances which characterize the governmental system slowdown and make difficult decision making and action by a majority of the voters' elected representatives. The system of checks and balance necessitates delay and prolonged debate, deliberation, negotiation, bargaining, and compromise before the government can resolve highly controversial issues of public policy.
The government was forced to do significantly more than satisfy a simple majority and take into consideration and accommodate the interests and views of many different segments of the society.
This required the support of a consensus--rather than simple majority approval--for adoption and implementation of governmental decisions on controversial questions of national public policy.
It is a decision-making structure taking into account as broad a range of opinions as possible, as opposed to systems where minority opinions can potentially be ignored by vote-winning majorities.
Indian democracy to its credit has proved to be the type of constitutional democracy that operates to prevent quick and easy majority decision making and implementation.
The numerous checks and balances which characterize the governmental system slowdown and make difficult decision making and action by a majority of the voters' elected representatives. The system of checks and balance necessitates delay and prolonged debate, deliberation, negotiation, bargaining, and compromise before the government can resolve highly controversial issues of public policy.
The government was forced to do significantly more than satisfy a simple majority and take into consideration and accommodate the interests and views of many different segments of the society.
This required the support of a consensus--rather than simple majority approval--for adoption and implementation of governmental decisions on controversial questions of national public policy.
4
Well said.
The Parliamentary nod to the long hanging Goods and Services Tax (GST) bill- the 122nd constitutional amendment bill- aimed to create the One-Country-One-Tax regime in India, doing away with the vast array of state and federal taxes numbering about 20, is no doubt a major economic reform that turns India into a common market for goods and services, and a step ahead towards making India a hassle free place for foreign investment and doing business.
1
I'm reminded of France under the Ancien Regime: every region had an entirely different tax structure, there were (if I remember correctly) internal tariffs, and it was an internal mess. The Revolution got rid of that. Nothing less was able to succeed. Fortunate for India that a revolution wasn't required.
7
"... if I remember correctly ..."
That's not very helpful. Please cite a reliable source, such as a book.
That's not very helpful. Please cite a reliable source, such as a book.
Dear LVF,
Mr. Zaslavsky is clever and usually correct, and I'm happy to back him up here. This seems a reliable source:
"Unlike the trading nations, France could not rely almost solely on tariffs to generate income. While average tax rates were higher in Britain, the burden on the common people was greater in France. Taxation relied on a system of internal tariffs separating the regions of France, which prevented a unified market from developing in the country."
http://www.bonjourlafrance.com/france-facts/france-history/causes-of-the...
Mr. Zaslavsky is clever and usually correct, and I'm happy to back him up here. This seems a reliable source:
"Unlike the trading nations, France could not rely almost solely on tariffs to generate income. While average tax rates were higher in Britain, the burden on the common people was greater in France. Taxation relied on a system of internal tariffs separating the regions of France, which prevented a unified market from developing in the country."
http://www.bonjourlafrance.com/france-facts/france-history/causes-of-the...
1
DS: "Mr. Zaslavsky is clever and usually correct, ..."
If you say so, but in this case he is shallow. Pre-revolutionary France was a monarchy and post-post-revolutionary France was a Napoleonic dictatorship. Further, India was a colony of Britain until 1947. So the analogy between France and India is nonsense, and TZ is merely free-associating.
If you say so, but in this case he is shallow. Pre-revolutionary France was a monarchy and post-post-revolutionary France was a Napoleonic dictatorship. Further, India was a colony of Britain until 1947. So the analogy between France and India is nonsense, and TZ is merely free-associating.
GST adoption has been a long overdue step in India. Good for India that it is finally getting this done in a bipartisan way.
I hope the US learns something from this and adopts a federal GST of its own. We direly need to eliminate our archaic corporate tax structure and replace corporate taxes with a federal GST. Unlike corporate taxes, GST cannot be avoided by moving corporate headquarters overseas. Even foreign companies end up paying GST. It would encourage companies to bring in money socked away overseas and invest in the US.
I hope the US learns something from this and adopts a federal GST of its own. We direly need to eliminate our archaic corporate tax structure and replace corporate taxes with a federal GST. Unlike corporate taxes, GST cannot be avoided by moving corporate headquarters overseas. Even foreign companies end up paying GST. It would encourage companies to bring in money socked away overseas and invest in the US.
7
Tax reform framed as "simplification". Who could disagree? But wait – where have I heard that old canard before? Rather than a fleeting reference to "opposition", I would like to know why objections were made to "reform". Petty private interests, or maybe demands of state infrastructure? The author has made the decision for us.
3
This still will not solve India's most urgent problems- lack of governance/rampant corruption, general disregard of safety of human life with unclean living conditions and numerous mass casualty fatal accidents.
5
And what is your expertise that allows you to make this comment?
4
If there was "lack of governance" the "Govt" wouldn't have been able to pass reforms and amend the Constitution for change. Just because the roads are not as clean and the traffic and facilities are not as orderly as the west doesn't imply there is no governance. A country with hardly 300 million people like america is so complicated and diverse - imagine a country of a billion plus people living in less than a third of the land as the US with much more diversity and social tensions - you will come close to India. Corruption exists everywhere - it is only the degree that varies.
Dear Sallie G.,
Those aren't necessarily urgent problems for India. Disregard of safety, lack of sanitation leading to disease, and mass casualty accidents are all, sorry to say, helpful for India. India's number one problem, as with a lot of the world, is overpopulation.
Those aren't necessarily urgent problems for India. Disregard of safety, lack of sanitation leading to disease, and mass casualty accidents are all, sorry to say, helpful for India. India's number one problem, as with a lot of the world, is overpopulation.
1
Indeed,passing GST in the upper house of Indian parliament by bringing together all political parties that are sui generis in their form and function is a great leap in Indian tax reform under Mr.Modi. The participation of all political parties above their party line to pass GST in the upper house is a true demonstration of unity in diversity.
The upcoming generation Y would convert India into a real super power in the near future ,if they are ready to stand together and set their target on 'growth of the nation is the growth of its citizen'.
The upcoming generation Y would convert India into a real super power in the near future ,if they are ready to stand together and set their target on 'growth of the nation is the growth of its citizen'.
4
Good and positive step. It's a rare positive article on India by Ellen Barry, so congratulations.
8
It's a rare positive step by India, as well. So thank you and thank yourselves.
Ps: Next time, don't beg for awards, you will get one when you deserve.
Ps: Next time, don't beg for awards, you will get one when you deserve.
2
Dear KK13,
That's an obscure grudge, and misguided. What awards did India, as a nation, beg for? And, what does this person have to do with that?
That's an obscure grudge, and misguided. What awards did India, as a nation, beg for? And, what does this person have to do with that?
With dozens of languages, hundreds of dialects, several major religions and many more minor ones, a GST is unlikely to be of great value in promoting economic growth. A uniform code will be more useful if communists were ruling India, suppressing all individual and states' rights. A better approach would be for the center to be responsible only for two areas: defense including internal security and non-economic foreign policy. Let individual states be responsible for and compete in all areas, from taxation to education to tariff rates to contract law. Business and infrastructure and labor will automatically gravitate to states that are open and fair and graft-free.
3
Letting states set their own taxes is what got the country into its current mess. It is widely known that movement of goods within the country is severely hampered by states setting their own tax policies (ex. trucks lined up at state borders with waiting times of days). GST will not only simplify tax policy but also enable efficient tax revenue collection. It is a very good thing.
11
No taxation at the local level is not only messy but such "competition" can become dangerous for the nation as states adopt a "beggar thy neighbor" approach and enter into a zero sum game to capture the most revenue and industry for themselves. This harms the citizenry that has to deal with lopsided policies and inflationary pressures due to excessive regulation, bizarre taxes and varying energy costs. Education, law and order and many such subjects are part of the States mandate to govern - Taxation too was a State "subject" but this Constitutional amendment on the GST would subsume their ability to tax and the Federal Govt's ability to tax into a unified architecture where revenue will be split based on consumption.
It will also reduce corruption at the state borders, increase tax collection, flow of goods will be faster ...
India has historically taken 19th century British bureaucracy to a higher dimension of useless complexity, which has placed a serious headwind to its economic transformation. This change in tax codes offers a promising hint of a tail wind. Well done!
16
British Bureaucracy was eminently competent and able . What India did is encumber this bureaucracy with ideological dogmas like socialism, welfare stateism and protectionism and removing all sense of accountability for the bureaucrats. Even today, it is the bureaucrats who decide by "committee" on what their pay scales will be and send their demands to the politicians .
It is a historic decision that the law makers of this country has taken on the way to becoming the top three economies of the world along with USA and China in the coming years. With its world class human resources both in talent and numbers India is just "waiting to fly" and beat the estimates of all critics who said "India cannot rule itself". This government has clearly shown to the world that corruption can be minimised and governance can deliver inclusive development.
India is in top 3 economies, on what scale, simple GDP? I mean, PPP, Gini Index, GDP per capita don't matter to you, right? Thank god you have 1.25 Billion population, otherwise...
Please check your PPP and GDP per capita, let me know where you rank.
Please check your PPP and GDP per capita, let me know where you rank.
1
http://www.independent.co.uk/news/business/us-china-india-the-10-biggest...
This is the prediction . by 2030 India will be 3rd largest?
This is the prediction . by 2030 India will be 3rd largest?
It should be obvious that total GDP and GDP per capita both matter greatly.
Total GDP determines a country's effect upon the world, through economic policy and defense. This is why China exerts so much influence now despite having a low GDP per capita, and why Luxembourg is irrelevant despite having a high GDP per capita.
Per-capita GDP determines the health and welfare of individual citizens. People in Luxembourg live very well, as long as someone else is willing to defend them.
Total GDP determines a country's effect upon the world, through economic policy and defense. This is why China exerts so much influence now despite having a low GDP per capita, and why Luxembourg is irrelevant despite having a high GDP per capita.
Per-capita GDP determines the health and welfare of individual citizens. People in Luxembourg live very well, as long as someone else is willing to defend them.
Congratulations to the citizens of India. This is an indication of the daring and the "can do" spirit prevailing there since the last few years. There is an intense visceral desire to catch up in development with countries like China. Best wishes.
15
As labor market data shows and all respected literature on labor markets in India claim, the figure of "1 million young people entering the workforce every month" - as this article reports - is incorrect. This is a falsehood that has been perpetuated across the mainstream media in India and abroad. In India, 1 million young people enter the *working-age population* every month, not the workforce. This is a huge difference in a country where the youth labor force participation rate is only 35 percent (http://data.worldbank.org/indicator/SL.TLF.ACTI.1524.ZS ). The accurate statement, therefore, is that about 350,000 young people enter the workforce each month. The other 650,000 that become "working-age" (15+) are in education, training, or simply not engaged in any economic or learning activity.
9
somewhere, Milton Friedman is smiling... tentatively, slightly and with a wait-and-see attitude - but smiling nonetheless
6
Integrating the states of India and their competing interests is beyond the talent of mere mortals. India's population is too large. Religion, ignorance, vast poverty, a non-existent infrastructure and a government so at odds with itself can never, ever bring this country together.
The best that could happen to and for India is to break up the nation and start from scratch. Actually that is the most likely scenario as the states are in such opposition to each other and common sense interests.
India, though not likely to admit it, is always on the verge of civil war within itself. That doesn't even take into consideration its border issues with Pakistan.
The great poverty that dominates the nation like its greatly uneducated and largely ignorant population is an overwhelming burden. When tens of millions lack basic education, health care, plumbing and worship cows that pollute the streets and water where they live the outcome is predictable. In this case collapse of the social and economic systems.
Passing a tax, that can't be collected and then distributed for the nation's improvement is nothing to be celebrated. Mega-reform is not reform until its executed. It be many years if any of the benefits of this tax can be felt by ordinary citizens. Until then the streets will continue to be sewers for humans and sacred cows.
The best that could happen to and for India is to break up the nation and start from scratch. Actually that is the most likely scenario as the states are in such opposition to each other and common sense interests.
India, though not likely to admit it, is always on the verge of civil war within itself. That doesn't even take into consideration its border issues with Pakistan.
The great poverty that dominates the nation like its greatly uneducated and largely ignorant population is an overwhelming burden. When tens of millions lack basic education, health care, plumbing and worship cows that pollute the streets and water where they live the outcome is predictable. In this case collapse of the social and economic systems.
Passing a tax, that can't be collected and then distributed for the nation's improvement is nothing to be celebrated. Mega-reform is not reform until its executed. It be many years if any of the benefits of this tax can be felt by ordinary citizens. Until then the streets will continue to be sewers for humans and sacred cows.
12
Hmm... If this is indeed the case, would you please expound on why and how India has managed to stay together for 70 years without a hint of breaking up? Pray how is the country posting 7 plus percent growth? And how has it remained the only functioning democracy between Western Europe and Japan? Sorry to bust your bubble, mate. India will find its own way, as it always has, and this will include worshiping some sacred cows whilst discarding others.
17
maybe india would have been better off had th brits not left
doesnt seem theyre doing a better job of running things themselves
You seem to be very misguided and prejudiced in your snap judgement of a country housing more than 1/6th of the world population. With that many people, there is bound to be a multitude of opinions and interests, and much smaller countries have about as many opinions as well. India is a fairly unique country, in the sense that historically, this region has always been very diverse and yet unified due to a common culture. India has a lot of interdependence, with its resources spread all over the map. Breaking it up into countless new countries will add undue burden to the existent infrastructure and the existent approach of sharing resources, sometimes begrudgingly. Imperialists have done that before, i.e. breaking up the country, as a tactic to subdue the population. We decided to stitch ourselves back together, for good reasons, when we obtained Independence. And it's been working well since, thanks for asking.
In any case, you seem to have a very biased and prejudiced disposition about the state of affairs in India. Before you proclaim the collapse of society and economical systems, please note that this country has been and continues to work well, albeit inefficiently, despite the overwhelming burdens that you point out. Not all of the world needs to be or will ever be a photo copy of the way things run in the US.
And this is an important milestone for India, even if certain other countries got a head start for setting up their tax code.
In any case, you seem to have a very biased and prejudiced disposition about the state of affairs in India. Before you proclaim the collapse of society and economical systems, please note that this country has been and continues to work well, albeit inefficiently, despite the overwhelming burdens that you point out. Not all of the world needs to be or will ever be a photo copy of the way things run in the US.
And this is an important milestone for India, even if certain other countries got a head start for setting up their tax code.
42
This is an excellent first step. While I have not been a huge fan of Modi I have admired his ability simplify regulation when he was the Chief Minister of Gujarat. Now I hope he moves to reform the income tax system in order ensure a just mechanism that curtails tax avoidance schemes.
1
I hope i'm wrong, but while this will ease the movement of goods, corruption will find it's way to get fed.
Corruption has to do with culture and stopping it is like playing 'whack-a-mole'.
Corruption has to do with culture and stopping it is like playing 'whack-a-mole'.
4
No corruption here of course. Its normal business that wealthy people write off most of their expenses including golf club memberships and why our SC governor has fancy suites at the USC and Clemson football stadiums for entertaining out of town businessmen so they can see the "value" of our state.
An excellent explainer of India's GST:
http://indianexpress.com/article/explained/gst-bill-parliament-what-is-g...
http://indianexpress.com/article/explained/gst-bill-parliament-what-is-g...
2
A good read. Thanks for sharing.
It is about time for a similar overhaul of their judicial system, that will make it safer for foreign investments and tourism.
It is about time for a similar overhaul of their judicial system, that will make it safer for foreign investments and tourism.
GST is by the elite, of the elite and for the elite. It is just like formation EU. Some states loose and some states gain similar to Greece and Germany. States loose economic freedom. Unlike EU where Brexit could occur, there is no such option because they are all under the same constitution. States must reject the implementation of GST or at least make modifications to protect themselves from central control. India is not Australia or New Zealand to make comparisons. Otherwise, India may split into South India and North India. Beware!
2
Absurd fantasy . States gain by being part of the union and having access to 1 billion consumers at their doorstep. Unlike EU - India is a nation where the benefit of the whole outweights the narrow interests of a few and states realize this. South India or North India are not independent of each other and just because one Southern state has a problem doesn't mean the other 4 southern states don't celebrate the GST as it brings them more revenue because they have more customers for products produced by the fifth.
The current non-GST system is a mess.
But, lofty as the GST Bill’s goals may be, there is no certainty that the new GST, which will essentially work as a Value Added Tax (VAT), will not be messier. While a single tax is always better than a complex web of taxes, the truth is that a lot of the GST’s benefits are all on paper.
The biggest issue with the GST is that few of our leaders can explain what it really is, beyond the few sound-bites. Fewer can show how it is calculated.
India is the only country in the world that is trying out a three-tiered GST formula where State, Central and Integrated taxes have all to be reconciled. The programme’s design and implementation will be a nightmare. The entire regime will depend upon the business intelligence contained in the lines of code that make up the GST system and the integrity of associated data. Sellers and service providers will have to file forms in every State they operate in. If electronic records do not match, tax credits, which are the foundation of the system, will not materialize, hurting businesses and confidence in the government.
The government has a huge job on its hands. This is not something one can do over again, so it has to get it completely right the first time. A scary proposition.
But, lofty as the GST Bill’s goals may be, there is no certainty that the new GST, which will essentially work as a Value Added Tax (VAT), will not be messier. While a single tax is always better than a complex web of taxes, the truth is that a lot of the GST’s benefits are all on paper.
The biggest issue with the GST is that few of our leaders can explain what it really is, beyond the few sound-bites. Fewer can show how it is calculated.
India is the only country in the world that is trying out a three-tiered GST formula where State, Central and Integrated taxes have all to be reconciled. The programme’s design and implementation will be a nightmare. The entire regime will depend upon the business intelligence contained in the lines of code that make up the GST system and the integrity of associated data. Sellers and service providers will have to file forms in every State they operate in. If electronic records do not match, tax credits, which are the foundation of the system, will not materialize, hurting businesses and confidence in the government.
The government has a huge job on its hands. This is not something one can do over again, so it has to get it completely right the first time. A scary proposition.
2
Actually much of what you are saying is already been worked out - and both the principal Opposition leaders in Govt and the current Finance Minister have both worked on making this tax a reality in their respective times behind the desk. They both are aware of the complexities involved and yet with these constraints new technologies like the aadhar unique id system coupled with electronic payments growth will provide a credible way of tracking end customers and calculating tax credits and company claims.
FYI - sellers and service providers already file forms in every state they operate in and pay taxes in every state they operate in and apply for tax credits and benefits in every state they operate in. The present system will just make it more streamlined and less opaque in terms of taxation.
FYI - sellers and service providers already file forms in every state they operate in and pay taxes in every state they operate in and apply for tax credits and benefits in every state they operate in. The present system will just make it more streamlined and less opaque in terms of taxation.
If government bureaucracy in the USA drives you mad, India is the poster country for a bureaucracy gone mad. Just buying a simple train ticket is so complex most unaware of the system must resort to people who buy tickets for tourists as a living.
The Indians copied the British government which ran India until the late 40's.
The USA has a major stake in the growth of India so they can help keep China under control.
Having traveled a lot, India is my most favorite country to visit. Their culture and cuisine is still very alive and vibrant to this day. My next trip to India will be to the south of the country which is the cradle of their civilization.
The Indians copied the British government which ran India until the late 40's.
The USA has a major stake in the growth of India so they can help keep China under control.
Having traveled a lot, India is my most favorite country to visit. Their culture and cuisine is still very alive and vibrant to this day. My next trip to India will be to the south of the country which is the cradle of their civilization.
30
Next time try IRCTC website to book railway ticket along with food and everything for the entire journey. It's easy , no need to contact agents.
https://www.irctc.co.in
https://www.irctc.co.in
6
Well, most online web sites like Yatra.com or MakeMyTrip.com lets you reserve train tickets (but you also need to register at Indian railways website). Also, IRCTC also does allow to make reservations. Don't know if there any restrictions for non Indian citizens. The good thing about India, services thru humans like agents are not prohibitively expensive compared to the west - so not too bad an alternative for convenience. Yes, south India is lot of fun and you will surely enjoy - both past culture (forts, temples, etc) and modern facilities like KFC & McDonalds.
2
the cradle of India's civilization is the Indus and Saraswati river valleys, in the north-west of the country and in what is now "Pakistan".
1
So a rare case of bi-partisanship when people from many parties rallied to one cause- the greater good for the country.
In addition to a policy milestone, I reckon this is also a milestone on governance maturity in India - quite a few 'thick headed', 'quasi-insular' people saw the greater common sense.
From what I read, the vote passed with all votes in favor.
If this is what Modi can do, way to go! Keep it up and keep on governing. You are the best from the lot.
So far.
In addition to a policy milestone, I reckon this is also a milestone on governance maturity in India - quite a few 'thick headed', 'quasi-insular' people saw the greater common sense.
From what I read, the vote passed with all votes in favor.
If this is what Modi can do, way to go! Keep it up and keep on governing. You are the best from the lot.
So far.
1
US is the land of immigration - it imports talent from outside in sectors that most need it.
One such sector is American politics.
How about immigrating Jaitley and have him resolve the never ending party deadlock in US?
Jaitley for President! (Yes I am talking US)
One such sector is American politics.
How about immigrating Jaitley and have him resolve the never ending party deadlock in US?
Jaitley for President! (Yes I am talking US)
4
Great step forward! Kudos to the vision the effort and the future!!
4
An Indian from Bangalore
exclaimed in a rage "What a bore!"
"To simplify taxes
will take many axes
before we can even the score!"
exclaimed in a rage "What a bore!"
"To simplify taxes
will take many axes
before we can even the score!"
6
The accountant from Baroda
Was eating his pakora
When he deduced
If taxes were reduced
Then he would make more-a!
Was eating his pakora
When he deduced
If taxes were reduced
Then he would make more-a!
3
Another feather in Mr. Modi's cap. If he stays in power for two terms India will be unrecognizable in twenty years.
It's about time India is governed by commonsense driven, honest, politicians.
It's about time India is governed by commonsense driven, honest, politicians.
25
Congratulations to all parties in the Rajya and Lok sabha to have finally passed a historic reform rising above petty politics.
Hope the Indian government works harder and quicker to implement economic reforms which will alleviate more Indians out of poverty. A hard fought victory by Modi, and hopefully not the last.
Hope the Indian government works harder and quicker to implement economic reforms which will alleviate more Indians out of poverty. A hard fought victory by Modi, and hopefully not the last.
12
Connecting all states for free trade is a much needed boost for the economic empowerment. Definitely a step forward. Better late than never?
Now the challenge remains to be answered whether the Modi government will be able to truly integrate all states to accept and pass it as a law.
Now the challenge remains to be answered whether the Modi government will be able to truly integrate all states to accept and pass it as a law.
3
This is a breakout moment for the Indian economy.
GST has been in the making, or dragging on, for over a decade. This will surely help increase the velocity and reduce the friction from almost all business transactions. it will also help bring more business activity into the documented, and taxed economy.
The proper utilization of the tax receipts by the national, state and local governments should be the next challenge that India needs to tackle head on. There is a lot of leakage, diversion, misappropriation and misuse of government resources and monies at all levels, and almost all over India. It is most pronounced in the poorest states where people would benefit the most with real and actual expenditure on education, health and development.
GST has been in the making, or dragging on, for over a decade. This will surely help increase the velocity and reduce the friction from almost all business transactions. it will also help bring more business activity into the documented, and taxed economy.
The proper utilization of the tax receipts by the national, state and local governments should be the next challenge that India needs to tackle head on. There is a lot of leakage, diversion, misappropriation and misuse of government resources and monies at all levels, and almost all over India. It is most pronounced in the poorest states where people would benefit the most with real and actual expenditure on education, health and development.
6
This is a great victory for Modi. As a CEO of an American consumer products company in India in the early days of economic liberalization there, I had a firsthand experience of the difficulties in navigating through the vagaries of state tax structure among other things. It was a huge source of complexity and as a result great source of corruption. It was good for the bureaucrats and politicians as it provided power which translated to money.
I am still not sure it will eventually be implemented as every politician and bureaucrat that benefitted from these "business friction points" will fight it tooth and nail every step of the way.
I am still not sure it will eventually be implemented as every politician and bureaucrat that benefitted from these "business friction points" will fight it tooth and nail every step of the way.
9
The 0.01% who rule India must be ecstatic!
But "Growth for the sake of growth is the ideology of a cancer cell." Edward Abbey
And this "HUGE reform" will help very, very few people. It's mostly about helping the rich get richer. Too bad Donald Trump can't run for president of India.
But "Growth for the sake of growth is the ideology of a cancer cell." Edward Abbey
And this "HUGE reform" will help very, very few people. It's mostly about helping the rich get richer. Too bad Donald Trump can't run for president of India.
It will mean tighter economic integration of India. End to end IT based tax compliance will hugely improve 'ease to do business'. Logistics will be cheaper and tax realisation higher even though effective cost consumer pays comes down.
6
This is such a major step in many ways. Anyone familiar with India will have seen the long line of "lorries" lined up at individual state borders. This throttling of the commerce was crazy not just because of the multiple taxation but also for the corruption that all this bred in the system. Bribes are the norm rather than the exception at these border posts and are simply the cost of business. If this is implemented properly there is the potential for a true national economy rather than the protectionist system in place today. A great and valuable step.
51
Obviously the people commenting about the USA and Obama Administration have never been in India or have never done any international business in the India territory. The reform is a crucial step to fix the tax system in India; however, the India taxation system is leap and bounds more complicated than the USA tax system.
16
When you hear the words "foreign investment" you should head for the hills. It typically is a euphemism for neoliberal policies that benefit the wealthy and well-connected and further suffocate the aspirations and well-being of the poor and working-classes.
9
I assume you mean well, but having grown up in socialist India through the late 70s to the early 90s, I could not wait to hightail it to capitalist US. I a very much working class and in 20 years of living in the US, moved from lower 50% to the top 2%, and I still work hard with the ambition of hitting 1%.
The good news is that thanks to foreign investment many of my very much working class friends were able to take advantage of an expanding economy ad get ahead. It is Socialism that helps the politically connected and pressure groups, and it is crony capitalism that makes us lose faith in Capitalism.
Unfettered capitalism is actually the best system, rewarding those who seek opportunity any work hard.
The good news is that thanks to foreign investment many of my very much working class friends were able to take advantage of an expanding economy ad get ahead. It is Socialism that helps the politically connected and pressure groups, and it is crony capitalism that makes us lose faith in Capitalism.
Unfettered capitalism is actually the best system, rewarding those who seek opportunity any work hard.
8
Parag Vohra, I appreciate your first- and second-hand experiences, but "unfettered capitalism" is what leads to crony capitalism. Capitalism must be carefully regulated in order to function as it is theoretically supposed to. (Please do not misread "carefully" as either "severely" or "lightly", nor as "moderately". I mean "carefully".)
1
TZ: '... "unfettered capitalism" is what leads to crony capitalism.'
The term "unfettered capitalism" is used by people who don't know anything about economics, so you haven't said anything. If you want to sound like you know what you are talking about, read up on "market and non-market economies" in "Basic Economics" by Thomas Sowell. Sowell gives many examples, including some from India.
The term "unfettered capitalism" is used by people who don't know anything about economics, so you haven't said anything. If you want to sound like you know what you are talking about, read up on "market and non-market economies" in "Basic Economics" by Thomas Sowell. Sowell gives many examples, including some from India.
Can we get Modi over here to burn 26 CFR (the tax code)? It's doubled in size since I graduated law school in 1967. It's depressing that more than half the population goest to shyster "tax preparers" to to do simple tax returns.
This code is for the !% who pay their criminal (excuse me, "tax") lawyers to save them hundreds of thousands of dollars every year. The other 99% get letters that they underpaid by $26.00.
Truly a country of laws.
This code is for the !% who pay their criminal (excuse me, "tax") lawyers to save them hundreds of thousands of dollars every year. The other 99% get letters that they underpaid by $26.00.
Truly a country of laws.
6
If you could pay a lawyer $100,000 to save you $105,000 in taxes you would do the same thing. No one is stopping you from paying more than you owe. The government will take it.
EinT: The federal and state governments will return excess income tax payments. I have experienced this. If they correct an error in your income tax return and find an overpayment, they return it with interest.
(Note that I referred to "income tax". So many people forget all about sales tax and other taxes. That distorts their perception of the tax burden.)
(Note that I referred to "income tax". So many people forget all about sales tax and other taxes. That distorts their perception of the tax burden.)
1
TZ: "So many people forget all about sales tax and other taxes."
Who are those people who "forget"? Certainly not the people who have to pay those other taxes.
Who are those people who "forget"? Certainly not the people who have to pay those other taxes.
1
Hopefully with the new tax reform, India's citizens will stay home instead of stealing jobs from American tech workers.
They don't steal, to be fair. They are offered the jobs and take them for the prestige they offer. The pay is usually considerably better than any local position as well. If you must blame somebody blame the companies that outsource.
13
As a white U.S born hiring manager in the U.S in the tech industry, I don't look at skin color or nationality when hiring for roles I have open. It all comes down to skills. I need to get things done. If an Indian or Chinese or Canadian or Brit has the skills I need then I hire them whether it be here in the U. S or in Bangalore where we have offices. They don't need to come here to get a tech job.
11
Indian workers saved $200 billion for American companies last year alone. We also invested $15 billion in the US last year thus creating 96000 jobs. When America wants globalisation , it should not expect to eat all the cake by itself. Indians still earn $2000 compared to $50000 per capita income of Americans, so it's not fair to target Indians. Business is give and take. Better trade with India rather than China who not only rip you off but also steal commercial and military secrets.
13
The U.S. needs a sweeping tax overhaul. And not one where taxes will be increased and spent like the Vets Administration where millions of dollars of artwork was purchased instead of administering health care.
3
Why isn't this tax being examined critically? To this untrained eye it seems to be a flat tax on things consumer. Isn't this exactly what right-wing think tanks long for, and won't it hit the poor unfairly? There is a real pro-business, neoliberal slant to this article that seems a little bizarre.
9
The tax would have exemptions on lots of items consumed by poor.
The current rate for VAT in India is 12% but on food products it is 2%. The same approach would be used here
The current rate for VAT in India is 12% but on food products it is 2%. The same approach would be used here
4
India's income tax is progressive and an absolute majority does not pay taxes at all on their incomes. This tax as you note, is a consumption tax, which is typically flat on a per product basis. Keep in mind that this is not viewed as a new tax but a replacement of fragmented rates across geographic locations by a flat rate across the country.
1
Funny how India is able to get this obviously good tax reform done, while the US tax reform is stalled by politics and special interests.
49
India has been talking about this for 10+ years as well. The new government finally pushed it through so they do deserve the credit atleast.
4
There is a lot of politics in India a lot more than in USA and the sincerity of the Indian politicians is much lower as compared to politicians from the USA. Didn't you read the paragraph in the article which talked about how each party either supported or blocked this bill depending on whether they were in power or not. The only reason this bill got passed is again due to the fact the Congress party found itself isolated and the current political party in power must have played a lot of politics(dirty or not who can say) to get the other minor parties on-board. It definitely highlights the fact that the current political party i.e. BJP has a powerful political muscle.
1
This is a seminal moment for the Indian economy, if its implementation is done well. We in the US know that the ACA was a historic change. It's implementation was not up to par. Good luck to India for rolling this out with flying colors.
16
Simply put, this is the Indian equivalent of the formation of the European common market (albeit more complicated).
21
Good Job India! Glad you could work together to make this happen, which is is achievable in this country
12
A consumption tax such as this one is regressive, taxing poor people more than the rich. What is so great about it? Why is the NYT not discussing the need for an income tax?
22
Why do you assume that there is no Income Tax in India?
1
Not really. India already has a durable system to deliver countervailing subsidies as direct cash deposits to bank accounts of poorer families.
7
Please spare us from your soap box.
This is not a VAT, or a consumption tax of any kind. (even if it was there are ways to counter the bad effects of that --which India is quite capable of doing.. like injecting direct cash aid to the poor, free rations etc)
This is only a simplification of the already existing multi-layered and overlapping sales tax system.
If you are just trying to get the words India and regressive in the same sentence, I can't really help you.
This is not a VAT, or a consumption tax of any kind. (even if it was there are ways to counter the bad effects of that --which India is quite capable of doing.. like injecting direct cash aid to the poor, free rations etc)
This is only a simplification of the already existing multi-layered and overlapping sales tax system.
If you are just trying to get the words India and regressive in the same sentence, I can't really help you.
4
Maybe it will create jobs at home to end the systemic abuse of the US H1-B visa program by Indian outsourcing and IT firms.
48
It will move to another country like Vietnam, Indonesia or anyone of the upcoming economies. We have to focus on the "us" as the soution is in us reforming our laws with common sense.
4
Don't forget the decimation of middle class jobs in the pharmaceutical industry that are now largely given to Indians through the H1-B visa program.
Americans can earn all of the STEM degrees they want, but you'll quickly find that US companies prefer the cheap labor they can either get through H1-B visas or just outsourcing to another country.
There will be little left of the middle class if this job destruction program is allowed to continue. Sadly, neither presidential candidate cares.
Americans can earn all of the STEM degrees they want, but you'll quickly find that US companies prefer the cheap labor they can either get through H1-B visas or just outsourcing to another country.
There will be little left of the middle class if this job destruction program is allowed to continue. Sadly, neither presidential candidate cares.
3
Peter D,
As long as US companies pad their bottom line by outsourcing jobs to someone willing to work for less, outsourcing and its abuses will go on. If US citizens were willing to do IT work for the same wage as an Indian H1-B holder, you would have no problem either. Demand always precedes the supply. The demand in on the US side.
As long as US companies pad their bottom line by outsourcing jobs to someone willing to work for less, outsourcing and its abuses will go on. If US citizens were willing to do IT work for the same wage as an Indian H1-B holder, you would have no problem either. Demand always precedes the supply. The demand in on the US side.
4
Fascinating how India is trying to reform and simplify taxes while the Obama Administration (and it's likely successor) head in the opposite direction. As the Times pointed out yesterday, Silicon Valley has been humble enough to learn from China in the mobile tech sphere. The Administration should embrace that humbleness and learn from New Delhi. I doubt any of us should hold our breath, however, on that actually happening.
20
Oh, right, and complexity in the tax code totally started with Obama. How old ARE you?
43
Where do you get that? Democratic proposals have for years called for simplifying the tax code only to get stymied by Congressional and right wing disinformation campaigns, that you apparently believe. And to add a fact - I know you won't like that - the tax code was renamed the tax code of 1986 after St. Reagan passed TRA. So there is where the blame lies for the complexity of the tax code.
another Hated fact for you - the new Indian legislation also imposes a 6% withholding tax on payments by Indian companies to outside business enterprises for online advertising. So of course, we (I work for an internet company) will just raise our prices by 6% on Indian based customers. OK so maybe you are right; this will be simpler. yeesh...
another Hated fact for you - the new Indian legislation also imposes a 6% withholding tax on payments by Indian companies to outside business enterprises for online advertising. So of course, we (I work for an internet company) will just raise our prices by 6% on Indian based customers. OK so maybe you are right; this will be simpler. yeesh...
11
The tax system is determined by Congress, not the executive. If you want a simplified tax system write to your Congresspeople. Plus it is people like you that jump up and complain any time the President does try to modify the "System" in any way and call him a dictator.
1
This is HUGE reform. Benefits to the Indian economy, and to companies operating in india -- including foreign businesses-- will be immense. It will also dramatically reduce corruption among petty functionaries across the country who have their hands out every time an economic transaction crosses state borders within India.
Think of it as the equivalent of the US adopting a nation-wide value-added tax, and getting rid of all the state ad local taxes.
Think of it as the equivalent of the US adopting a nation-wide value-added tax, and getting rid of all the state ad local taxes.
76
You almost had it correct until the last statement. The comparison you give is flawed for three reasons. First, it is not correct as it doesn't describe the proposed tax change . Second, the US sales tax system is not that complex. Third, not many in the U.S. are familiar with VAT and examples should be familiar.
The more apt comparison is as follows..Imagine if sales and movement of ALL goods are regulated across state borders the same way IS regulates controlled substances (guns, tobacco, medicine etc); that's how it is in India now. They are trying to change it.
The more apt comparison is as follows..Imagine if sales and movement of ALL goods are regulated across state borders the same way IS regulates controlled substances (guns, tobacco, medicine etc); that's how it is in India now. They are trying to change it.
4
The Indian legislation just replaces state level consumption taxes with a federal consumption tax. The equivalent in the US would be to replace the state level sales taxes with a national sales tax. The rest of the state level taxes - income, payroll, etc. - would remain, just like they did in India.
2
There are no payroll or income taxes at state level India. There is a professional tax at city level. This primarliy affects manufactured goods . they have currently state sales tax, state excise tax, central sales tax, central excise tax, octroi ( city level) and state level. This will replace all of this with a single service tax.
This will also replace service tax on services
This will also replace service tax on services
2