COLOMBO (EconomyNext) – India’s Goods and Services Tax (GST) bill, approved by the lower house of parliament last week, will make it easier to do business there, a senior Indian diplomat told Sri Lankan investors.
The Goods and Services Tax (GST) has been hailed as ‘game-changing reform’ that will turn India into a single big, seamless market and reduce transaction costs for business.
It will harmonise the plethora of Indian state and central government taxes, that Sri Lankan companies trying to penetrate India’s market had complained about, into a national sales tax.
Arindam Bagchi, acting Indian High Commisioner in Colombo, said India understood the concerns Sri Lankan investors have in doing business there.
Both governments were looking to deepen their economic ties with a Comprehensive Economic Partnership Arrangement (CEPA) proposed to replace the existing Indo-Lanka Free Trade Agreement (FTA) signed in 1998.
Bagchi said that while Sri Lankan firms complain it is difficult to enter India’s market, Indian companies in Sri Lanka say they are also facing these kind of issues.
"We are also trying to improve. The common GST will make India a more common market," he told the third Indo Ceylon Economic Dialogue forum organized by the Federation of Chambers of Commerce and Industry of Sri Lanka and PHD Chamber of Commerce and Industry, based in New Delhi, India.
"The GST Bill was passed in the Lok Sabha. It now remains in the Rajya Sabha (upper house of parliament). It will make it easier to do business in India."
Alok B. Shriram, President, PHD Chamber of Commerce and Industry, said the implementation of the GST Bill would be a ”potential game changer” for the Indian economy and speed up growth.
"It will simplify and rationalize the complex tax structure which would be critical to remove the cascading impact of indirect taxes on economy and to create a pan-India common market across the country."
Other Indian business chambers have said the passage of the GST bill will send a strong signal to the global investors that India’s reform process is well on course.
GST will have a direct bearing on the way companies design their distribution networks in India and the development of the warehousing sector.
The Lok Sabha passed the GST Constitutional Amendment Bill last week with a two-thirds majority. It remains to be approved by the Rajya Sabha where the government does not enjoy a majority.
The Indian government aims to have GST effective from 1 April 2016.