Prime Minister Narendra Modi said on Tuesday the government is hopeful of rolling out a landmark goods and services tax bill by next year and will not to resort to retrospective taxation, in a bid to woo foreign investors to Asia’s third-largest economy.
Modi listed a slew of measures his government has undertaken to improve ease of doing business in the country — including work on a new bankruptcy code — as he pitched India as the ultimate investment destination at an Indo-German summit in Bengaluru.
“We have introduced the GST bill in Parliament; we are hopeful of rolling it out in 2016. We want to make sure our tax regime is transparent and predictable. We are also keen to see genuine investors and honest tax payers get quick and fair decisions on tax matters,” he said. “At a time of global slowdown, India represents a bright spot for investments.”
The Nasscom event was the concluding part of a three-day visit by German Chancellor Angela Merkel and the two leaders earlier visited German engineering giant Bosch’s headquarters in the city.
Modi said India was committed to protecting the intellectual property rights of innovators and entrepreneurs, and a comprehensive national policy was being finalised that would be progressive and forward-looking.
“I can say never before was India so well prepared to absorb talent, technology and investment from outside,” he said.
The GST bill — which aims to replace a string of central and local levies such as excise and octroi with a single tax — is a key constituent of the government’s reform agenda that has run into rough weather in Parliament.
The government has already pushed the tax bill through Lok Sabha but faces an uphill battle in Rajya Sabha, where it is in a minority, with a belligerent Opposition in no mood to give in. Once it passes Parliament, the bill will need approval from at least half of the state legislatures.
Since the NDA government came to power 15 months ago, India’s credibility in the eyes of global investors has been successfully restored, Modi said, a day after signing agreements to fast-track German investments.
Modi wants to attract foreign capital pulling out of China, where a slowdown has sent shockwaves through the financial world, to back his flagship initiatives to create skilled jobs for millions of Indians.
“As a result of our initiatives, the sentiments for private investment and inflow of foreign investment have turned positive. The growth rate of our GDP is above 7%. FDI inflows have gone up 40% compared to the previous year’s corresponding period,” Modi said.
Modi has repeatedly vowed to make the country more investor-friendly and rectify bureaucratic sloth and processes that have kept India almost at the bottom — ranked 142 — of the World Bank’s ‘ease of doing business’ index.
But niggling concerns remain, especially aggressive past government attempts to retrospectively tax companies, most famously telecom giant Vodafone in 2007, which dragged the then UPA government to court and won earlier this year.
The NDA regime chose to not appeal against the order to boost investor confidence. It also waived retrospective imposition of a minimum alternative tax affecting foreign funds, to resolve a dispute that shook investor confidence.