Shops and businesses reopened in India amid confusion Saturday, hours after the government introduced a new nationwide tax that will change the cost of nearly everything people buy, replacing a complicated mix of state and federal taxes.
Prime Minister Narendra Modi heralded the major overhaul of the taxation system — known as the Goods and Services Tax — at a midnight ceremony Friday in Parliament.
The main opposition Congress party and some other parties boycotted the ceremony, arguing that nearly 7 million traders needed more time to prepare for the new system, which requires them to file tax returns every month. The opposition, however, supported the new tax system.
Traders shut shops and businesses as a protest in the Indian portion of Kashmir, where insurgent groups have been fighting for independence from India or the region’s merger with neighboring Pakistan since 1989.
“This law aims at crushing the economic activities of Kashmir,” said Mohammed Yasin Khan, a trade union leader. “We will not allow implementation of the GST in the region. Kashmir is otherwise declared a disturbed area. So, legally and logically there can’t be implementation of the new system.”
Modi said in his speech Friday that the new system would eliminate 500 types of taxes in favor of one tax across the country, a catalyst that would remove trade imbalance and promote exports.
“GST is a simple, transparent system that prevents generation of black money and curbs corruption,” the prime minister said. “The system gives opportunity to honesty and people who do honest business.”
India’s chief economic adviser, Arvind Subramanian, was confident that the teething problems would be worked out soon. “There will be some hurdles initially, but we will be able to remove them in one or two months,” he told reporters.
Most of India’s 29 states have passed local laws to implement the new tax regime, but some have pleaded for more time. The government has dismissed that idea.
First proposed in 2003, the idea was bogged down for years in bipartisan debate, with various governments trying to push it forward while opposition politicians dragged it back. Before Modi and his Bharatya Janata Party came to power three years ago, they were staunchly against the move.
While economists mostly agree that a single, nationwide tax will streamline business, there are concerns about how an economy as unwieldy as India’s will transition to a system that involves filing monthly tax returns online. MDT/AP
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