India lower house approves GST reform

Wed 6th May 2015

The lower house of the Indian Parliament, the Lok Sabha, today approved the Constitutional Amendment Bill to introduce a Goods & Services Tax (GST) Indian regime.

GST will replace a myriad of consumptions taxes, including: VAT; CENVAT; Service Tax; and Professional Tax.  These are highly complex to comply with, and often overlap causing a large degree of double taxation.  This hampers the development of India’s free, internal market that is viewed as a major constraint to growth.  It has been estimated that a fully functioning VAT-like tax in India, based on the OECD recommended model, could boost annual growth in India by up to 2% per annum.  Chinese VAT is undergoing a similar reform to great success.

The Indian Bill will next go to the upper house for approval.  It then must be agreed to by a majority of the Indian States.  It is still hoped that the implementation date will by 1 April 2016.