Indian prime minister Narendra Modi launched a new system of taxes last Saturday, a massive rollout of unified tax laws that was over a decade in the making. This new unified tax code has replaced more than a dozen central and state tariffs with different rates for each of India’s 29 states. All of India’s goods and services have been placed in one of five tax brackets ranging from a 0% tax for agriculture items to a 28% tax on luxury goods. Each product will now attract a single tax rate across the country, which will remove the long delays custom of India’s state border crossings.
So why should we care?
India is currently the second most populous country on earth with around 1.3 billion people and a 2 trillion-dollar economy. The International Monetary Fund forecasts that this generalized system of taxation will raise India’s GDP above 8% and add 0.6% growth rate to India’s economy over the next 15 years.
India’s wages have been increasing exponentially since the 50’s and with the implementation of this new taxation system, India’s public infrastructure will finally match the higher standard of living that many Indians have now realized. Overall this taxation system will increase foreign direct investment as a unified Indian economy will be simpler to work with than the previous system.