Modi Recalls Pre-GST Struggles: Bangalore-Europe-Hyderabad Route Made A Mess Of Indian Commerce
Modi said that for decades, citizens and traders were entangled by levies like Octroi, Entry Tax, Sales Tax, Excise, VAT, and Service Tax.
Prime Minister Narendra Modi on Sunday recalled India's complex web of taxes in the pre-GST era, referencing an article published over a decade ago that highlighted the challenges a foreign company faced doing business in the country.
Modi said that for decades, citizens and traders were entangled by levies like Octroi, Entry Tax, Sales Tax, Excise, VAT, and Service Tax. The PM pointed out that transporting goods from one city to another required crossing multiple checkpoints, filling numerous forms, and navigating a maze of differing tax rules at every location.
He shared a personal memory from 2014, when he took over as Prime Minister, mentioning a striking example published in a French business newspaper.
The report described the challenges faced by a French company that found it so difficult to send goods from Bengaluru to Hyderabad — a distance of just 570 kilometers — that it preferred to ship the goods from Bengaluru to Europe and then back to Hyderabad.
"Given that most freight travels by road, and that railways are also congested, few doubt the economic benefits of clearing up the mess. At present, the cost of logistics for Indian manufacturers is often more than the entire wage bill — more than double in the case of textiles — and far higher as a percentage of sales than for international competitors. Halving the delays caused by road blocks and other stoppages would cut freight times by 20-30% and logistics cost by 30-40% says the World Bank," the report said.
PM Modi stated these conditions were a direct result of the complex web of taxes and tolls. He highlighted that lakhs of companies and crores of citizens faced daily hardships because of the complex web of multiple taxes.
Modi emphasized that the increased cost of transporting goods from one city to another was ultimately borne by the poor and recovered from customers, the general public.
The Modi government replaced all old levies with a Goods and Services Tax in 2017 with a four-slab structure. The GST will now be revised to a two-rate regime (5% and 18%). Notably, petroleum products are out of GST's ambit.
