Image copyright AFP Image caption It is not clear whether small businesses are ready for the tax

India has replaced its numerous federal and state taxes with the Goods and Services Tax (GST), designed to unify the country into a single market.

The historic overhaul of the existing tax legislation was carried out at a special midnight session of parliament.

India says introducing GST will cut red tape and increase tax revenues, fuelling economic growth.

Finance Minister Arun Jaitley says the reform will help the economy grow by 2%.

But businesses have been asking for more time to implement changes, worried that they are not ready for the move to the new system.

Many do not even have a computer to register on the GST network.

Media playback is unsupported on your device Media caption Explaining India's new Goods and Services Tax

"No country of comparable size and complexity has attempted a tax reform of this scale," Harishankar Subramanian, of Ernst and Young previously told the BBC.

Under the new system, goods and services will be taxed under four basic rates - 5%, 12% 18% and 28%.

Some items like vegetables and milk have been exempted from GST, but will still be subject to existing taxes.

The price of most goods and services are expected to increase in the immediate aftermath of the tax.

Analysts expect economic growth to slow down over the next few months, but say it should pick up after the tax is fully implemented.</s>NEW DELHI: India on Saturday launched its biggest ever fiscal reform with the government promising a stronger, less corrupt economy while businesses are nervous about the new tax.The goods and services tax (GST) replaces more than a dozen levies imposed nationally and by the 29 states. It aims to transform the nation of 1.3 billion people and its $2 trillion economy into a single market.Prime Minister Narendra Modi held a special midnight session of parliament to launch GST which he called "a good and simple tax.""With GST, the dream of one India, great India, will come true," the prime minister said."GST is a simple, transparent system which prevents generation of black money and curbs corruption," said Modi who jolted the country last year by withdrawing more than 85 percent of India's banknotes from circulation in a clampdown on under-the-table dealings."The system gives the opportunity to honesty and people who do honest business."But the prime minister, who has put huge efforts into the economy as he targets re-election in 2019, acknowledged that it would have teething problems.Jammu and Kashmir state has refused to sign onto the one tax regime. And GST has sparked protests by traders, while the main opposition Congress Party boycotted the launch ceremony.Businesses are nervous about the imposition of GST, which sets out four different rates of between five and 28 per cent instead of the one originally envisioned.The GST rule book runs to more than 200 pages and last-minute changes were still being made late Friday.Textile traders and other sectors went on strike ahead of the launch and many businesses say they are unclear about what to charge.The Bhartiya Udyog Vyapar Mandal , a national traders association that claims 60 million members, called a one-day strike Friday to protest the GST.Many are worried because while returns have to be filed by computer, they do not have or do not understand computers."Since August last year we have put forward our demands on GST but the government has never responded," national secretary general Vijay Prakash Jain told AFP. "We told the government, either fix this, or we will strike."Most economists agree the reform -- first proposed in 2006 -- is long overdue, but warn the initial shock to the economy is likely to drag, rather than stoke growth, as businesses adjust.Credit Suisse managing director Neelkanth Mishra warned that "the next few months will be a period of uncertainty in which no company would want to invest, that slows down the investment cycle and acts as a drag on the economy."Rating agency ICRA said that while GST would lead to an increase in compliance in some sectors, it would also reduce the competitiveness of the informal businesses who are expected to lose out to the formal and organised players."Although it is still far from perfect, we realise how much better it is than the myriad taxes we've been subjected to over the last several decades," said Pratik Jain, Partner and Leader Indirect Tax, PwC India "The old India was economically fragmented. The new India will create one tax, one market for one nation," Finance Minister Arun Jaitley said.</s>Prime Minister Narendra Modi launched India’s biggest tax reform in its 70-year history, as businesses and citizens across the country steeled themselves for the economic turmoil that’s expected to follow.The new goods and services tax was formally ushered in at a late-night session of Parliament, reminiscent of the midnight meeting presided over by India’s first prime minister, Jawaharlal Nehru, on the eve of the country’s independence in 1947. GST marks the economic integration of India," Modi said in his speech to current and former lawmakers, business leaders and central bank officials in the parliament’s packed central hall. "There are 500 taxes and we are getting rid of it. From Ganganagar to Itanagar and Leh to Lakshadweep, it is one nation, one tax."But amid the euphoria, President Pranab Mukherjee also offered some words of caution. "GST is a disruptive change, no doubt," he told the gathering. "When a change of the magnitude is undertaken, however positive it may be, there are bound to be some teething troubles and difficulties in the initial stage."First proposed in 2006, the GST subsumes more than a dozen state and central levies into one tax, unifying 29 states and 1.28 billion people into a single market for the first time.It’s expected to expand India’s narrow tax base and increase government revenues. It has been heralded by economists and will count as the most important economic reform of Modi’s three-year-old administration.Evan as the tax was launched, shoppers were lining up to take advantage of potential offers. "I wanted to be one of the first buyers in the GST era -- I was the first one to enter the store at 12 a.m." said Dunsten Joe Miranda, 45, at a Big Bazaar store in Mumbai. "All I am bothered about with the GST is whether prices are coming down or not. I came here for some deals," Miranda said.Still, even supporters think it’s going to be chaotic in the short-term, despite a two-month relaxation in initial filing requirements."There will be disruption," said Rajeev Chandrasekhar, an investor and upper house lawmaker who is part of Modi’s ruling coalition and sat on a parliamentary committee on GST. "There will be plenty of hiccups -- part technology, part administration."Businesses are confused by a complicated structure, which includes four tax slabs ranging from 5 percent to 28 percent and numerous exemptions. It’s also not clear what sort of damage the nationwide roll out will inflict on the country’s fast-growing, $2 trillion economy before the long-term benefits kick in."We are not ready," said K.E. Raghunathan, a Chennai-based business owner and president of the All India Manufacturers Association. "We do expect tremendous chaos."Protests and industrial strikes broke out across the country as the deadline approached. In the states of Tamil Nadu, Gujarat and Rajasthan, tens of thousands of textile workers went on strike, while the association that represents sellers of seeds, pesticides and fertilizers protested in the agricultural state of Punjab.Just hours before the launch, the tax rate on fertilizer was reduced to 5 percent from 12 percent and tractor components were cut to 18 percent from 28 percent, a government official told reporters in New Delhi, asking not to be identified citing rules.Some large companies have assigned staff full-time to the transition, while others worry their thousands of small-time suppliers will find it difficult -- if not impossible -- to register online and comply with filing requirements. Everyone from businesses to the central bank are watching for the first signs of stress as the tax ripples through India’s largely informal economy.Part of the problem is that India is a "non-tax compliant" society, as the country’s finance minister has said frequently. Across India, fewer than 1 percent of people pay income tax and nearly 90 percent of workers are employed in the mostly non-taxed informal economy. Many will be paying tax for the first time."Our chartered accountant says that we need to file three monthly sales reports for GST," said Ashok Kumar Gupta, 37, who manages a small pharmacy in New Delhi. "Along with this, we will file monthly, quarterly and annual returns."The tax will boost the country’s fiscal health in the medium-to-long term, wrote Eurasia Group analysts Shailesh Kumar and Sasha Riser-Kositsky in a June 28 note."The GST is considered the most important milestone for the Modi government," they said. "It signals to investors the government’s ability to deliver on its reform agenda. Once the GST is fully operational, it will be groundbreaking and significantly change India’s business environment."Still, short-term disruption are expected as supply chains grapple with the new requirements."Given that literacy and digital knowledge in India varies, proper compliance with the registration and filing process is challenging," Kumar and Riser-Kositsky wrote. Businesses "may temporarily cease to do business with errant filers, disrupting supply chains and the availability of goods, and fueling near-term inflation."In the central Indian town of Bhopal, Amit Verma, a wholesale distributor of surgical disposables, said small businesses are in a state of "utter confusion" and that the intricacies of the tax are beyond many of them."We are not against the GST," Verma said. "But the issue is it’s so complicated that a normal businessman is finding it very problematic."For larger companies, compliance has meant organizing training seminars for suppliers and vendors and assembling dedicated GST teams. Aditya Gupta, head of business development for logistics firm Drive India Enterprise Solutions Ltd., said the firm has assigned four executives to work full-time on the new tax -- and that doesn’t even include international tax consultants."An entrepreneur, instead of running a business is now running after auditors," said Raghunathan, president of the manufacturers association who lobbied to have the GST roll out delayed. He said chartered accountants across the country are charging as much as 15,000 rupees ($232) to help register small businesses with the GST’s free online portal.The Reserve Bank of India has said the impact from GST is likely to be minimal.India’s inflation has eased to a record low of 2.2 percent as the central bank’s battle against price pressures gains traction. It could ease further as businesses offer hefty discounts to consumers in "GST sales" before July 1.Central bank Governor Urjit Patel said the new tax will lower overall tax rates in the long-term. "GST itself is part of the digitization revolution," Patel told a June 22 event organized by industry lobby IMC Chamber of Commerce and Industry.The opposition Congress party, which originally proposed the GST in 2006, boycotted the midnight ceremony. It said the ruling Bharatiya Janata Party was implementing the GST without proper planning. "How many Indians will suffer because of the haste of the BJP?" read a message on the party’s Twitter account on Friday.</s>NEW DELHI: India on Saturday launched its biggest ever fiscal reform with the government promising that a new nationwide tax would make the economy stronger and less corrupt, but businesses are nervous about the revolution.

The new goods and services tax (GST) replaces more than a dozen levies imposed nationally and by the 29 states. It aims to transform the nation of 1.3 billion people and its $2 trillion economy into a single market.

Prime Minister Narendra Modi held a special midnight session of parliament to launch GST which he called “a good and simple tax”.

“With GST, the dream of one India, great India, will come true,” the prime minister said.

“GST is a simple, transparent system which prevents generation of black money and curbs corruption,” said Modi who jolted the country last year by withdrawing more than 85 percent of India’s bank notes from circulation in a clampdown on under-the-table dealings.

But the prime minister, who has put huge efforts into the economy as he targets re-election in 2019, acknowledged there would be teething troubles.

Jammu and Kashmir state has refused to sign onto the one tax regime. GST has sparked protests by traders, while the main opposition Congress Party boycotted the launch ceremony.

Cinema strike

 Businesses are nervous about GST, which sets out four different rates of between five and 28 per cent instead of the one originally envisioned.

The GST rule book runs to more than 200 pages and last-minute changes were still being made late Friday.

It allows local authorities to impose some taxes. The first fallout was seen Saturday when the southern state of Tamil Nadu announced a 30 percent levy on movie tickets, in addition to the 28 percent GST fee.

All 969 movie cinemas in the state will close from Monday in protest, M. Subramanian, president of the regional theatre owners association, told Agence France-Presse.

“Because of this we will lose customers and it will encourage illegal downloads of movies,” he said. “We will continue the strike till this 30 percent tax is removed.”

“That’s the risk you have when you don’t subsume all the taxes,” said Pratik Jain, Partner and Leader Indirect Tax, PwC India. “It defeats the purpose of one tax.”

Textile traders and other sectors went on strike ahead of the launch and many businesses say they are unclear about what to charge.

Bhartiya Udyog Vyapar Mandal, a national traders association that claims 60 million members, called a one-day strike Friday to protest the GST.

Many are worried because while returns have to be filed by computer, they do not have or do not understand the technology.

“Since August last year we have put forward our demands on GST but the government has never responded,” national secretary general Vijay Prakash Jain told Agence France-Presse. “We told the government, either fix this, or we will strike.”

Most economists agree the reform—first proposed in 2006—is long overdue, but warn of an initial shock to the economy as businesses adjust.

Credit Suisse managing director in India Neelkanth Mishra warned that “the next few months will be a period of uncertainty in which no company would want to invest, that slows down the investment cycle and acts as a drag on the economy.”

Rating agency ICRA said that while GST would increase in compliance in some sectors, smaller traders and businesses that are not compliant will lose business to large firms with big networks.

“Although it is still far from perfect, we realise how much better it is than the myriad taxes we’ve been subjected to over the last several decades,” said PwC’s Jain.

“The old India was economically fragmented. The new India will create one tax, one market for one nation,” Finance Minister Arun Jaitley said.</s>President Pranab Mukherjee and Prime Minister Narendra Modi press buttons for the launch of 'Goods and Services Tax GST ' at midnight at the special ceremony in the Central Hall of Parliament in New Delhi on Saturday. (PTI)

At the stroke of the midnight hour, India launched its ambitious nationwide indirect tax regime, the Goods and Services Tax (GST) to bind the country under "one nation, one tax, one market".

 

 The roll-out was done by President Pranab Mukherjee in the Parliament's Central Hall. The event took place in the presence of Prime Minister Narendra Modi, Vice President Hamid Ansari, Union Finance Minister Arun Jaitley and others.

At the stroke of the gong, the current tax rates were replaced by the GST rates. The Goods and Services Tax has now replaced a slew of indirect taxes with a unified tax regime and will help modernise the third largest economy in Asia.

 

 The event was boycotted by the Congress, Trinamool Congress, DMK and some other Opposition parties.

IN-DEPTH: How the GST will impact consumers, traders and govt

IN PICS | How will GST affect services?​

IN PICS | 10 things that will become more expensive after GST rollout

President Pranab Mukherjee and PM Narendra Modi officially launch the Goods and Services Tax.

GST reform is a result of consensus between central and state governments. GST is a tribute to the maturity and wisdom of India's democracy. GST will make India's exports more competitive and provide level-playing field to domestic industry to compete with imports: President Mukherjee

Recounting the GST journey, President Pranab Mukherjee says, "This is a historic culmination of a 14-year long journey, which began in December 2002. It is a moment of personal satisfaction for me." The introduction of GST is a momentous event for the nation, he further adds.

President Pranab Mukherjee takes the dais to address the Parliament ahead of the GST launch.

GST is a transparent and fair system that prevents black money and corruption and promotes new governance culture: Prime Minister

It's a coincidence that even the Bhagwat Geeta has 18 chapters, and even the GST council has had 18 meetings! Long wait at toll plazas will end with GST integrating 31 states and UTs as one: Prime Minister

GST is an economic integration of India just like what Sardar Vallabhbhai Patel had done decades back to integrate the country: PM Modi

GST is a result of a long thinking; all states along with Centre discussed for years. It is an example of cooperative federalism. We are about to get rid of nearly 500 kinds of taxes tonight: PM Modi

This historic reform is not an achievement of any one government or party. There couldn't have been a better place (Central Hall of the Parliament) for the GST launch: PM Modi

It's a big turning point for India. Today at midnight, we will decide the future course of India. India will move in a new direction with GST reform: PM Modi

GST Council has met 18 times. Reform shows India can rise above narrow politics. 17 taxes now centralised. GST is aimed at easing taxation on the weaker sections: Arun Jaitely

READ HERE: GST will help in lowering inflation, propelling GDP: Arun Jaitley

GST is an important achievement for the whole country. The old India was economically fragmented, the new India will create one tax, one market and for one nation: FM Arun Jaitley

ALSO READ: Lesser talktime, higher bills for mobile phone users under GST regime

Finance Minister Arun Jaitley takes the dais for introductory remarks on Goods and Services Tax launch.

All the dignitaries stand up for the national anthem. Former prime minister H D Deve Gowda on the dais with President, PM, Vice President, Lok Sabha Speaker at a special ceremony for GST launch.

President Pranab Mukherjee arrives at Parliament. His address is scheduled at 11.45 pm. - TV report

Union Finance Minister arrives at the Parliament for GST launch. - TV report

PM Narendra Modi arrives at the Parliament in the national capital for GST rollout. - TV report

GST Council cuts rates on certain tractor parts to 18 per cent from 28 per cent. - PTI

Finance Minister Arun Jaitley says tax rate on fertiliser reduced to 5 per cent from 12 per cent. - PTI

School supplies like pencils and books are unlikely to get costlier under the GST regime, HRD Minister Prakash Javadekar said today.In fact, most consumer goods will not become expensive from tomorrow because GST rate for 81 per cent of the items has been kept below 18 per cent tax category, he said.

READ MORE: School supplies unlikely to get costlier under GST: HRD Minister Javadekar

After failing to meet the deadline for the implementation of Goods and Services Tax (GST) in Jammu and Kashmir, the PDP-BJP coalition government has convened four-day Special Session of J&K Assembly from July 4 to discuss the implementation of the new tax regime in the State.

READ MORE: JK misses deadline on GST rollout, convenes Assembly session from July 4

Movie theatres across Tamil Nadu to be shut indefinitely from Monday due to ambiguities around GST: TV reports

Film producer and distributor Dhananjayan took to Twitter, “TN theatres have announced indefinite shut down of theatres from Monday as Govt of TN has not come out with a clear support 2 film industry.We delivered a good film in #IvanThanthiran but sadly Govt.of TN's lack of clarification on both GST&Local Tax is killing our film's success”

FULL REPORT: Tamil Nadu theatres to shut down from July 3

The Telangana government has demanded that GST on social infrastructure projects be rolled back to five per cent, saying the State's additional burden works out to Rs 19,200 crore, according to a key Lok Sabha member.

The Congress-led UDF opposition has decided to boycott the government function to be held at Kochi tomorrow as part of rolling out of GST from midnight, to protest against not discussing and passing the state GST bill in the assembly.

READ MORE: Congress-led UDF to boycott GST function in Kerala

Slamming the Modi government over the GST roll out at midnight tonight, West Bengal Chief Minister Mamata Banerjee today said it would bring back the dreaded "Inspector Raj".

READ MORE: 'Inspector Raj' is back, says Mamata on GST

Karnataka Chief Minister Siddaramaiah today said his party was not opposed to the Goods and Services Tax (GST), but against its usage as a "propaganda tool".

READ MORE: Opposed to GST being used as propaganda tool: Karnataka CM Siddaramaiah

Congress Vice President Rahul Gandhi today dubbed the implementation of GST as a "tamasha", saying the reform was being rushed through in a "half-baked" manner as a "self-promotional spectacle".

Finance Minister Arun Jaitley on Friday held out the assurance of a "very smooth" transition into the Goods and Services Tax (GST) regime, promising that the administration will be very liberal and not implement it "very strictly" in the first two months.

READ MORE: GST rollout to be very smooth, says Finance Minister Arun Jaitley

Hours before the roll out of GST, traders in the business hub of Uttar Pradesh today squatted on rail tracks and stopped the Kanpur-Pratapgarh passenger train in a protest against the new tax regime. The traders led by 'Akhil Bhartiya Udyog Vyapar Mandal' leader Gyanendra Misra protested at the Lucknow railway crossing here around 9.47 AM and stopped the local train.

READ MORE: Traders protest GST, stop train; wholesale market shut down in Kanpur

Deputy Chief Minister Manish Sisodia, who also holds the finance portfolio, described the GST as a "great idea", but slammed the Centre over the way it was being implemented.

READ MORE: Traders are scared, people are worried: Sisodia on GST

The implementation of GST regime would lead to "chaos" similar to what had happened in the aftermath of demonetisation of high-value notes last year, AIMIM president Asaduddin Owaisi said today.

READ MORE: GST will lead to chaos just like demonetisation: Owaisi

With just hours to go before the GST launch, the Samajwadi Party (SP) was unsure about whether it would attend the midnight function in Delhi.</s>July 1 (Reuters) - India early on Saturday introduced its biggest tax reform in the 70 years since independence from British colonial rule.

The Goods and Services Tax (GST) replaces more than a dozen federal and state levies, unifying a $2 trillion economy and 1.3 billion people into one of the world's biggest common markets.

As the GST is a value added tax, firms will have an incentive to comply in order to avail credit for taxes already paid. This should widen the tax net, shoring up public finances.

India currently has one of the worst tax-to-GDP ratios among major economies at 16.6 percent, less than half the 34 percent average for the members of the OECD and also below many emerging economies.

Click on the links below for our full coverage ahead of GST launch:

LATEST NEWS >India launches new economic era with sales tax reform >"Party's over" for millions, as India launches tax reform >Fast forward; GST set to transform face of logistics industry >Modi set to launch India's biggest tax reform amid protests

EARLIER: >Ready or not, Indian businesses brace for biggest-ever tax reform >INTERVIEW-India ready for GST, anti-profiteering rules soon-Adhia >India's GST launch spawns tech cottage industry for compliance >BREAKINGVIEWS- Modi's India can ride out giant tax reform >No excuse for firms not to be ready for India's GST - Jaitley >India to allow late filing in first two months of GST - Jaitley GRAPHICS and MULTIMEDIA >India's GST launch tmsnrt.rs/2sykyGP >Indirect tax rates in the Asia-Pacific tmsnrt.rs/2tiEEnZ >Facebook Live - GST launch reut.rs/2u6AA8b (Compiled by Malini Menon in NEW DELHI)</s>EVEN as the Central Government has emphasised on “One nation, one tax,” and made its intention clear to weed out multi-layered tax structure in the country while rolling out Goods and Services Tax (GST), some of the taxes especially concerning civic bodies, Maharashtra State Electricity Distribution Company Limited (MSEDCL) and railways will, however, continue to remain in existence. In civic bodies, only the local body tax (LBT), which is the main source of revenue for them, has ceased to exist from July 1, the day GST was rolled out.

In the last financial year, the Pune Municipal Corporation (PMC) collected Rs 1,500 crore as local body tax. Similarly, the Pimpri-Chinchwad Municipal Corporation (PCMC) collected Rs 1,400 crore LBT. With GST era taking off, LBT has been confined to the dustbin of history. However, this has posed the problem of revenue for the civic bodies which are looking at the state government to rescue them.

“The state government has promised to compensate the civic bodies for the loss of revenue through LBT. How it will be done remains to be seen. We are expecting that the state government will compensate us quarterly. We are awaiting the government word on this count,” said Pune Municipal Commissioner Kunal Kumar on Sunday.

While local body tax is gone, property tax, however, will continue to exist. Similarly, the “sky sign” tax and water tax will persist. Kumar said, “Yes, property tax will remain as it is.” PMC collected Rs 1,200 crore property tax last fiscal while the PCMC collected Rs 393 crore property tax. So far as “sky sign tax” is concerned, Kumar said, “It is not a tax but a rent collected for allotting the civic space to private bodies.”

PCMC joint municipal commissioner Dilip Gawde said people believe that civic bodies charge “water tax” which is not true. “The concept now is water charges. People are charged for using certain amount of water…,” he said.

Explaining the concept of GST, the PMC chief said, “The one nation, one tax theme is applicable to goods and services and not to duties, charges, rents or fees.” Kumar added, “In any transaction involving purchase and sale of goods and services, GST will be applicable.” He said GST was a gamechanger and has ushered in ease of doing business for people from different sectors.

“A trader from Madhya Pradesh who had to register in Maharashtra or pay the local tax will not have to pay double taxation or resort to multiple registrations. Their business has been simplified and made hassle-free. GST is a major booster for the economy,” he said.

Like the civic front, electricity duty or tax will continue to be charged from consumers by MSEDCL, the state power utility. State MSEDCL spokesperson P S Patil said, “Electricity duty will continue to remain in force. However, as for the new rates under GST, we will come to know only by Monday.” MSEDCL officials said electricity duty or tax is 16 per cent for residential consumers, 21 per cent commercial consumers and 9.30 per cent for industrial consumers.

Officials said the electricity duty is charged on consumption at the applicable rate per unit of electricity consumed. “If electricity consumption is higher, then a consumer gets a higher electricity duty.” After the GST, the state government will also continue to collect stamp duties and levies on petroleum products and alcohol which, officials said, will be a temporary arrangement.

On the railways front, the Centre will continue to collect terminal taxes on goods or passengers carried by the railway. Taxes on railway fares and freights will also remain applicable. In a statement, the Ministry of Railways said the Railways are conscious of the need to minimise burden on our passengers. “GST is restricted to 5% (in place of service tax of 4.5% levied earlier i.e. an increase of only 0.5%) for passengers travelling by rail only in first class and air-conditioned coaches.”

Similarly, GST on transport of goods by rail will be 5% (in place of service tax of 4.5% levied earlier i.e. an increase of only 0.5%) with exemption for essential goods like milk and agriculture produce, the railways said.

For all the latest Cities News, download Indian Express App</s>The landmark Goods and Services Tax (GST) regime is a way to make India a largely tax compliant society, which will in turn give the government exchequer more money to develop the country, Finance Minister Arun Jaitley said on Friday.

Addressing the India Today Midnight Conclave - Tryst with Tax, the finance minister said, 'We are running the country on debt. If every taxpayer in the country were to pay their share of both direct and indirect taxes properly, do you think we would have to do that? If you want to run a country, provide proper housing, electricity, water, roads, healthcare, education and so on, we have to fix India's tax non-compliant character,' said the minister, hours before the most important indirect tax reform since Independence kicks in on Friday midnight.

The historic GST subsumes 17 indirect taxes such as numerous central and state levies of excise, value added tax, sales tax, octroi and luxury tax on goods and services to levy a uniform tax rate for the entire country.

All goods and services have been slotted in four slabs of 5, 12, 18 and 28 per cent.

Jaitley claimed that the 'one-nation one-tax' system is a much more efficient tax system as it gets every GST payer in India to register on the portal developed by the GST Network - the company monitoring the technology for the whole system.

'When the tax system becomes more efficient, the tax base increases and it becomes possible to make tax rates reasonable. At present, the compliant taxpayer is also paying for the non compliant ones because the government needs money to run the country.'

The GDP also grows as the size of formal economy grows, he added. It is mandatory for every business with a turnover of over Rs 20 lakh has to register with the GSTN to conduct business in the country.

So far, 67 lakh out of the total 80 lakh traders who fit the bill have registered on the portal.

However, petro goods, alcohol and real estate have left out of the GST's purview for lack of consensus among the states on their inclusion.

The reform, which has been 17 years in the making, is coming to fruition with the GST Council hammering out specifics in discussions spanning 17 meetings over the past year.

The GST is also an attempt to make indirect tax more equitable, Jaitley explained.

'While the direct tax is progressive as the rich pay more income tax than the poor, the indirect tax is regressive. Everybody pays the same taxes on goods and services, say, for instance on soap.'

He said that is why it was necessary to label same type of goods under different tax slabs. 'For example, garments can be expensive and cheap. Above Rs 1,000, the GST on garments is different from what you have to pay on those below Rs 1,000.

However, the GST was originally envisaged as a simple system with just one tax each for all goods and all services, which is what it is like in most countries that follow the system.

But Jaitley ruled out the model, saying it wouldn't work for India. 'In countries with one tax rate, for instance European countries, they don't have BPL families. Here, still 25% of the population is poor. So it is not fair to compare India with other countries which have rolled out the GST.'

They are also tax compliant societies, he added. The four tax brackets are important to keep GST's inflation impact under check by assigning products into the tax slabs closest to the current total tax incidence on them, Jaitley said.

Explaining the rationale, Jaitley said, 'if an item's total tax incidence is 6 per cent, it cannot possibly be slotted under the 12 per cent category.

'That would be highly inflationary. So, we require the 5 per cent slab, which would be for most products used by the masses.'

Going further, as the tax bases increase, there is a possibility of merging more slabs, he added.

He countered criticism about high compliance burden for businesses saying multiple taxes also have compliance burden.

'Now, you pay 17 types of indirect taxes. You pay returns for each of them. If goods move from one state to another, the rates are different and transaction costs are also higher. Instead of this, you have one tax, one return and one interface. In the former system, there were more chances of tax evasion.'

Under the new system, every month GST payers will have to file three returns on the GSTN - one that they fill out with all the invoices and two that will be generated by the system every month.

Allaying fears about the country not being fully prepared technology-wise, the finance minister said, 'Whenever a massive change of this scale takes place, there will be an element of uncertainty and fear of the unknown.

'That can lead to some disruption. There will be minor problems which can be rectified almost immediately, in most cases.'</s>The Goods and Services Tax (GST), India's biggest tax reform since Independence, was on Friday launched at midnight by President Pranab Mukherjee and Prime Minister at Parliament's historic Central Hall. With the stroke of the gong, the current tax rates were replaced by rates. GST, which replaces a slew of indirect taxes with a unified one, is set to dramatically reshape the country's $2-trillion economy.

 

 Here is a snapshot of some of the important things you need to know about the new tax regime:

The Goods and Services Tax (GST) is a uniform indirect tax levied on goods and services across the country. GST, as an umbrella tax, will replace central taxes like central excise, service tax, additional duties of excise & customs, special additional duty of customs, besides cesses and surcharges, on supply of goods and services.
• envisages all transactions and processes to be done only through the electronic mode, to achieve a non-intrusive administration. This will minimise the taxpayer's physical interaction with tax officials.
• provides for the facility of auto-populated monthly returns and annual return.
• It also facilitates the taxpayers by prescribing grant of refund within 60 days, and provisional release of 90 per cent refund to exporters within 7 days.
• Further facilitation measures include interest payment if refund is not sanctioned in time, and refund to be directly credited to bank accounts.
• Comprehensive transitional provisions for ensuring smooth transition of existing taxpayers to regime, credit for available stocks, etc.
• Other provisions include system of Compliance Rating, etc.
• Under the regime, exports will be zero-rated in entirety, unlike the present system where refund of some of the taxes does not take place due to fragmented nature of indirect taxes between the Centre and the States.
• is largely technology driven and will reduce the human interface to a great extent
• is expected to improve ease of doing business in India.</s>A man reads a newspaper next to banners in front of a closed garments market, during a protest against the implementation of the Goods and Services Tax (GST) on textiles, in Kolkata, India June 29, 2017.

NEW DELHI (Reuters) - At midnight on Friday, India will introduce nationwide goods and services tax with Prime Minister Narendra Modi taking centre-stage in parliament for what will be the country's biggest tax reform in the 70 years since independence from British colonial rule.

The GST will replace about 20 federal and state taxes such as factory-gate duties, service and local taxes while unifying $2 trillion economy and 1.3 billion people into a single market.

Modi, a Hindu nationalist politician who swept to power in 2014 promising reforms to get India's lumbering economy moving, will use the occasion to make a landmark speech.

Somewhat predictably, not everyone in the world's largest democracy is happy.

Even though the Congress Party first proposed the tax reform before it fell from power three years ago, it has been left wringing its hands over whether to join the parliamentary applause for a tax that should make India a far easier place to do business.

Mamata Banerjee, the firebrand leader of All India Trinamool Congress, certainly won't be clapping.

The firebrand leader of the regional party governing West Bengal intends to boycott the event, saying the ill-planned launch will hurt small enterprises across the country.

"A chaotic situation may arise in our vast economy," Banerjee told reporters in Kolkata, adding millions of small businesses were not yet ready to file multiple tax returns, and it could take up to six months to smoothly implement the legislation.

Thousands of textile mills and retailers across the country went on strike this week to protest the tax. Small businesses in particular are unhappy at the extra demands made of them to be tax compliant during the change-over.

Finance Minister Arun Jaitley has given businesses two months leeway to file late returns during the switch to GST..

A massive media campaign has been launched by the government to create awareness, with telephone help lines opened to address public concerns.

So far, more than three-quarters of the 8.1 million firms registered with the federal and state tax departments have enrolled with the GST Network, a massive IT back-end that will process up to 5 billion invoices a month.

Millions of small businesses, outside the tax net earlier, still have to join the network, and an umbrella organization pleaded for them to be given more time.

"For a seamless implementation of the law, the government should relax rules against traders for procedural lapses for six to nine months," Praveen Khandelwal, secretary general of the Confederation of All India Traders, said.

About a third of association's 60 million members lack a computer to register under the new tax regime.

(This refiled version of the story corrects to goods and services NOT goods and sales in first paragraph).
India replaces its federal and state taxes with the Goods and Services Tax (GST), the most extensive tax reform since its independence.