India, a nation where few pay income tax

Indian Prime Minister Narendra Modi, surrounded by cabinet members, speaks with news media
New Delhi, July 18, 2016: Indian Prime Minister Narendra Modi (C) and cabinet ministers at the Indian Parliament as it began to discuss a bill for the introduction of the Goods and Services Tax (source: dpa)
  • Of 1.25 billion Indians, less than 4 percent pay income tax
  • The government recognizes the need for a fundamental overhaul of the tax system, but is addressing only part of the problem
  • The newly passed Goods and Services Tax (GST) aims to streamline India’s maze of indirect taxes
  • Retroactive taxation has had a chilling impact on multinationals’ investment in India

In the first week of August, the Indian Parliament passed a constitutional amendment to introduce a Goods and Service Tax (GST), which had been in the making for over a decade. The amendment needs to be ratified by 15 of the 29 Indian states, which is expected to take place in the next three months. The government, backed by some analysts, insists that the GST will turn India into a true single market. Critics doubt that, arguing that the United States and the European Union did not need uniform sales taxes to craft their common markets. Some analysts are apprehensive that the GST may prove one step forward, two steps back.

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