India tax-overhaul bill moves forward

Article source
The Wall Street Journal

After more than a year of gridlock, the upper house of India’s parliament approved a contentious overhaul of the country’s convoluted tax system, an important step in Prime Minister Narendra Modi’s campaign to modernize Asia’s No. 3 economy.

Lawmakers voted Wednesday to replace India’s jumble of federal, state and interstate sales taxes with a nationwide goods-and-services tax, or GST. Parliament’s lower house, where Mr. Modi’s Bharatiya Janata Party and its allies have a large majority, is expected to pass the measure, a constitutional amendment, without difficulty.

India is a notoriously cumbersome place to do business. In the World Bank’s latest survey of the ease of paying taxes in 189 economies, it ranked 157th.

Shifting to a GST would help ease the burdens of double taxation and other distortions caused by the current system. The move, which India’s government first proposed a decade ago, would also lower barriers to interstate commerce. Some have compared it to the abolition of customs duties within the European Union.

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