Rocky start for India’s GST but outlook positive
India’s GST council meets today to review the nascent sales tax and discuss any issues that accompanied its implementation.
The council will address the initial hit taken by the Indian economy following the tax’s July 1 rollout. The excise’s five tax brackets confused consumers and producers alike, causing supply and demand of goods and services to slow. India’s Purchasing Managers’ Index, which measures economic activity across manufacturing and service industries, sank to its lowest since 2009.
Regardless, once producers adjust to filing tax returns on the GST Network and consumers acclimate to price changes, economic activity is expected to rebound.
Today’s meeting will also likely see some contend that the GST has not gone far enough to unify taxes across products and increase the ease of doing business within the country. In order to attract foreign investment, and encourage domestic economic activity, the Modi government may look to reduce the number of tax brackets from five to one or two. Such a proposal would face staunch opposition from business owners who would like to maintain low taxes on their goods.
