GST: China likely to see it as a scope not threat

'Chinese companies are certainly welcoming the move.'

Describing the passage of the Goods and Services Tax Bill in Parliament as a major boost to India's appeal to attract investments from multi-national and Chinese firms, China's official media today said it will add momentum to Indian economy -- one of the world's fastest growing economies.

The long-awaited tax reform plan 'could certainly boost India's appeal to multinationals, including Chinese firms, as a myriad of existing federal, state and interstate levies in the country had previously increased their tax burdens and barred them from further exploring potentials in the world's fastest-growing major economy', the state-run Global Times said in an article.

"China is more likely to see this reform, which aims to make India a better destination for investment, as an opportunity rather than a threat," it said, adding that China will be happy to see the reforms go through and will be willing to work with India to make it a reality.

"Chinese companies are certainly welcoming the move.

"Along with other restrictions, the country's complicated and cumbersome taxation system as well as bureaucracy related to tax-collection remains a hurdle for Chinese firms doing business in India," it said.

"While the reform is seen as a landmark move to transform India's $-2 trillion economy into a true common market and bring it closer in line with the international market, whether these benefits will materialise will be a test of the Modi government's ability and political wisdom to push the reform through.

"An effective implementation of the unified tax is also vital to help India truly transform into a manufacturing powerhouse," it said.

Although details on how the Goods and Services Tax will be levied are yet to be worked out, the new system could help reduce taxes on goods transferred across the country and boost economic growth if it is given a green light from the national parliament and Indian states, it said.

"The move is both politically and economically significant. Politically, it showed that the Modi government can compromise to get reforms made in the national interest.

"It could boost Prime Minister Narendra Modi's political legacy and gives him a better chance at a second term," it said.

"Most importantly, it could add momentum to the world's already fastest growing economy.

"According to HSBC estimates, the reform will add 0.8 percentage points to the country's growth within three to five years," it said.

"With 1.3 billion consumers, India's market has great potential.

"However, under the complicated tax system and perception of a challenging investment environment for foreign companies, India's potential is far from fully tapped.

"A well-designed GST could transform India into a more liberalised market and the second largest consumer market in Asia," it said.

The image is used for representational purpose only. Photograph: Reuters