Passing the GST Bill could lead to a surge of investment from China in sectors such as infrastructure, believe investors and officials in Beijing.
For Chinese investors, India’s “complicated” tax regulations have often been cited as one of the biggest hurdles when entering the Indian market.
Taxes that vary from state to state, policies that sometimes befuddle new entrants and tax rates that are seen as far higher than what Chinese find in other potential markets such as Southeast Asia are some frequently cited complaints.
Tax policy “is one of the biggest concerns we find from potential investors”, Wang Chao, the founder and CEO of ZD Invest, one of the few Beijing investment advisories that is dedicated to the Indian market, told India Today.
“The GST will be a great positive news for Chinese companies. With lower tax cost and easier environment of doing business, there will be a greater FDI flow from China to India,” he said.
SLOWDOWN IN CHINA
Driven by overcapacity in manufacturing and infrastructure, Chinese companies are facing a slowdown at home. Hence, they are increasingly looking to “go out” and invest overseas.
With China less interested in FDI in sectors such as manufacturing, reforms that boost India as a destination are hence being seen more as an opportunity than as a threat.
While India is seen as one of the rising top destinations because of the size of the market, there are still widespread perceptions of a difficult investment environment.
One executive at a Chinese State owned firm recalled being surprised by “taxes that vary when we cross the border from one state to another, unlike in China”.
BANKING ON MODI
The hope is the GST could address some of those concerns.
“The tax is a big barrier,” said Wang. “The GST, which is similar to China, will help them understand policy easier and give them more determination to bet big on India.”
Investors, he said, are now banking on the Modi government to remove this barrier.