India adopts GST

Government and business leaders attended a midnight ceremony to launch the tax at the Indian parliament's Central Hall.

Former Prime Minister Manmohan Singh, one of the architects of India's landmark economic reforms in the early 1990s, however, stayed away as the main opposition Congress and its allies boycotted the event they called a "tamasha" (gimmick).

Prime Minister Narendra Modi said the measure was more than a tax reform, saying it would help in India's social and economic progress.

"The GST will turn various Indian states into a common market.

"There are 500 types of taxes that play their roles. Today we are getting rid of them... From Ganganagar to Itanagar and Leh to Lakshadweep, it is one nation, one tax," he said.

President Pranab Mukherjee said the new indirect tax system was a "disruptive change", and any initial problems in its implementation would be overcome.

"It is similar to the introduction of value added tax when there was initial resistance. When a change of this magnitude is undertaken, however positive it may be, there are bound to be some teething troubles and difficulties in the initial stages," he said at the launch.

Minister of State for Finance, Santosh Gangwar, said the implementation of GST was a historic moment.

"Consumers will benefit under the GST regime. Depending on the need, we will review the taxes," he said.

Implementing the new tax regime across India's 29 states and seven federal-administrative territories is likely to have challenges as most small businesses lack the digital means necessary to comply with GST provisions.

There are four tax slabs, with the lowest rate for essential items fixed at five per cent and imposing 28 per cent tax at the top-end of consumer goods and services.