Gold Silver Reports — India’s upper house of parliament on Wednesday approved the creation of a national sales tax a decade after the move was first proposed, the biggest legislative victory for Prime Minister Narendra Modi since he took office in 2014 .
The constitutional amendment, one of India’s most significant reforms since the 1990s, now has to be endorsed by the Modi-controlled lower house and then ratified by at least half of all states, a process projected to be concluded before the year ends .
GST Passes Landmark Sales Tax Reform in Modi’s Biggest Win Yet
The goods-and-services tax, known as GST, will replace more than a dozen levies, creating a single market with more than a billion increasingly wealthy citizens. It adds to the appeal of a nation that Goldman Sachs Group Inc. in June called “one of the world’s most compelling” consumer stories for the next two decades .
“This is one of the most significant tax reforms in India in recent history,” Finance Minister Arun Jaitley told lawmakers ahead of the vote. “The enactment of GST will bring about the best in the economic management of the country in its federal form and it will empower the states .”
The tax stands to benefit companies in the world’s fastest-growing major economy, where internal barriers to trade increase logistics and compliance costs. Indian equities climbed last week near the highest level since August 2015 as optimism increased that the measure would finally pass .
“GST is the poster child of the Modi government’s reform agenda,” said Nilang Mehta, senior investment analyst at HSBC Global Asset Management, which oversees assets of about $429 billion. “Pushing this through will provide a major boost to the credibility of the reform process in India .”
Plaudits rained in from India Inc. as it became apparent that the measure would pass on Wednesday evening. India’s main business group hailed it as “one of the most awaited reform measures by the industry.” Rana Kapoor, chief executive officer of Yes Bank Ltd., said it would help investors “Believe in India.” Harishanker Subramaniam at EY India called it “historic.” — Neal Bhai Reports