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India's Taxing Tax System

Why the GST Is an Overdue but Welcome Overhaul

A tax office in New Delhi, April 5, 2013. Mansi Thapliyal / Reuters

“India’s enormous market—a caged tiger—will now be unleashed,” said Anand Mahindra, chairman of the automobile manufacturer Mahindra & Mahindra Ltd., about the passage of a historic tax bill last week. At present, the country’s 29 states essentially dictate their own individual tax codes, a confounding system that has long tripped up inter-state commerce. But to the world’s surprise—not least India’s—this disorder could finally be coming to an end. After more than a decade of protracted negotiations, intense shuttle diplomacy, and close combat with vested interests, both houses of parliament unanimously passed the landmark Goods and Services Tax (GST) bill in a move analysts have called, “one of India’s most significant and ambitious reforms ever attempted.” At its core, the GST will replace a bevy of state and federal taxes with a single, unified tax on goods and services, bringing the country closer than

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