Prime Minister Narendra Modi at Friday midnight launched the Goods and Services Tax (GST), 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.
GST 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.”
Evan as GST 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 am,” 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.”
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% 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 1 July.
RBI 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 22 June event organized by industry lobby IMC Chamber of Commerce and Industry.