India’s Parliament approved biggest overhaul of indirect taxes on Monday (August 8) after the lower house ratified a constitutional amendment Prime Minister Narendra Modi called a major step to make doing business easier. The proposed goods and services tax (GST) is one of the most significant reforms since India opened its economy 25 years ago and the revamping of the tax system since the country's independence in 1947.
The measure will harmonise a mosaic of state and central levies into a national sales tax, creating a single customs union widely expected to reduce business transaction costs, with potentially significant long-term growth benefits.
The upper house, where the measure was stuck for months, passed the bill last week. Modi hailed the passage of the bill as a ‘great step by team India, (a) great step towards transformation, great steps towards transparency’. ‘Today, an important move to free the nation from tax terrorism has begun,’ he told lawmakers in the lower house of parliament.
The advancement of the new sales tax is the biggest legislative victory for Modi, who swept to power in 2014 promising to nurse India's then faltering economy back to health.
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