India on Friday announced a slew of changes to its tax laws in a bid to ease the burden on small and medium businesses, which have suffered the most since the introduction of a new national tax earlier this year.
The goods and services tax (GST), which came into effect on July 1, was designed to replace more than a dozen state and national levies and transform India’s US$2 trillion economy into a single market for the first time.
First proposed in 2006, it got the backing of most economists and was hailed as the biggest tax reform since independence, but despite the government’s good intentions, many have slammed the authorities for creating a highly complex system that has added several layers of bureaucracy and hurt businesses.
Smaller enterprises — which provide one-third of India’s GDP — have been particularly critical, fearing they will be unable to comply.
Indian Minister of Finance Arun Jaitley on Friday told reporters in Delhi that the tax burden on smaller companies has been low but the compliance burden has been high.
“The medium and small companies should remain in the tax net, but we will relax their compliance burden,” he said.
Under the changes, companies with annual revenues of less than 15 million rupees (US$230,000) will need to file taxes once a quarter instead of every month.
The government has also reduced the GST on products such as unbranded savory snacks, roti and unbranded ayurvedic and homeopathic medicines to 5 percent.
“Compliances are something that have really hit the small traders very, very hard,” OricewaterhouseCoopers India partner Anita Rastogi said. “The changes they’ve done were needed, but they haven’t done enough.”
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