27/07/2016 9:56 PM IST | Updated 27/07/2016 10:14 PM IST

Cabinet Has Cleared Crucial Changes In GST Bill To Get Tax Reform Through Parliament

The government has dropped the controversial one percent additional levy

Amit Dave / Reuters
India's Finance Minister Arun Jaitley

The Indian government on Wednesday made crucial amendments to its goods and services tax bill in a move to enlist the support of opposition parties as well as state governments.

The proposed tax reform, the biggest since India's independence from Britain in 1947, seeks to replace a slew of federal taxes and levies in 29 states, transforming the nation of near 1.3 billion people into a customs union.

Analysts say the goods and services levy (GST) could boost India's economic growth by up to 2 percentage points.

As part of the amendments, the government has dropped a contentious 1 percent additional levy on inter-state movement of goods, and has agreed to compensate states for any revenue losses for five years.

While there is a broad political support for the measure, differences persist on the details, in particular pitching the tax at the right level to offset possible revenue losses.

Indian Finance Minister Arun Jaitley met his state counterparts on Tuesday to forge a political consensus on the bill that is held up in parliament.

ALSO READ: Why India's 'Biggest Tax Reform' GST Is Still Stuck

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