Narendra Modi was also in the Global
Indian Prime Minister Narendra Modi has accomplished a huge
amount since he came to power in 2014 promising to boost
foreign investment, simplify the tax code and cut down on
Modi and Minister of Finance and Corporate Affairs Arun
Jaitley (see page 41), were the twin catalysts behind the goods
and sales tax (GST) – a transformational regime which
was rolled out in July this year after 17 years of discussions.
The new regime got rid of state-wide levies and made India a
single market. The GST is not only expected to improve India's
reputation in terms of ease of doing business, but also boost
foreign investment and tempt multinationals to move their
operations to the subcontinent.
However, the GST has also meant a lot of disruption for
businesses, which have had little time to prepare for the
comprehensive regime. The GST is being blamed for India losing
its standing as the world's fastest-growing economy, but Modi's
government insists this is only temporary while businesses get
acclimatised to the new regime.
India has long been known as one of the most difficult
places in the world to do business, in large part due to its
dated and complicated tax system. However, the prime minister
got a boost in late October when India jumped 30 places to
100th – hardly an impressive ranking, but still a big
improvement – in the World Bank's ease of doing
business rankings. According to the rankings, India is among 10
countries that have seen big improvements related to ease of
At the same time, contributions to tax collection from
direct taxes have fallen to a decade-low, which could mean Modi
might start fulfilling his promises to overhaul India's direct
It isn't the first time India has tried to simplify the tax
code. The Income Tax Act, which dates back to 1961, has seen
many amendments that have made things increasingly complicated
for taxpayers. However, after seeing how quickly Modi managed
to turned the GST around, many believe changes to the tax code
will come in early 2018.
The prime minister wants to ensure paying taxes becomes as
easy as possible. Taxpayers should no longer have to submit
several tax returns, and dispute processes should be modernised
and sped up. In October, he urged tax officials to focus on
resolving disputes with the use of technology, as around $153
billion in direct taxes is believed to be tied up in
India's Central Board of Direct Taxes is also running an
advance pricing agreement (APA) programme, which has provided
security for nearly 200 multinationals so far and is expected
to reduce disputes.
In addition, an income tax app has been launched as part of
Modi's plans to provide better services for taxpayers. The app
includes features such as a live chat and important tax
updates, and the government hopes it will improve communication
between the income tax department and taxpayers.
India still has a long way to go before its tax code is as
simple as businesses would like it to be, but is on the right
track in this respect under Modi.