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The Confederation of Indian Industry (CII) has welcomed the passage of legislation to introduce a goods and services tax (GST) in the country.
The Constitution (One Hundred Twenty Second Amendment) Bill 2014 was endorsed by the Upper House of Parliament on August 3, 2016, concluding more than 10 years of delays to the introduction of the tax.
CII President Naushad Forbes said: "GST is India's most significant tax reform in decades. GST, when implemented, is expected to usher in a harmonized national market of goods and services and shall lead to a simplified, [taxpayer]-friendly tax administration system. Once implemented, it will subsume all of the country's central and state level duties and taxes, thus making the country a national market and contribute significantly to the growth of the economy."
The CII said that the manufacturing sector in particular is expected to be a big beneficiary of GST as the economic system becomes more competitive, while adding that as GST will be aligned with an information technology platform, the tax payment system would also be streamlined. It anticipates that the implementation of GST from April 1, 2017, would reduce transaction costs and boost GDP by 1.5-2 percent.
The CII welcomed the amendments proposed by the Government including deletion of the clause relating to levy of an additional one percent tax on supply of goods, full compensation for five years for any revenue losses arising from a transition to GST, and setting up of Dispute Resolution Authority by the GST Council, among other things.
The CII said: "While Government has left no stone unturned to seek a consensus, the willingness and maturity of the key opposition party in terms of understanding the issues and straightening out the differences is indeed praiseworthy. Industry can now think of 'One India,' which was truly pursued by almost all political parties in true letter and spirit. Both the ruling and opposition parties have set aside political bargaining and have joined hands at the moment to create history by ushering in a unified tax regime."
Under the GST proposals, the various elements of the existing indirect tax regime will be replaced by a comprehensive dual-GST system, with Central GST and State GST to be levied concurrently by the center (federal Government) and the states, respectively. A government panel has suggested a rate of 17-18 percent for the tax.
GST may now expected to be rolled out on April 1 next year. However, the Bill still needs to be ratified by 50 percent of Indian states.
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