(Yicai Global) July 4 -- After banning India's largest currency bills, the Modi Administration officially introduced the Goods and Service Tax (GST) reform on July 1 -- the country's biggest tax reform since independence.

Although some Chinese businesses with major Indian investments were puzzled by the recently rolled out restructuring, most firms are optimistic about the move.

India's new tax collection system is simpler and less confusing than the old one, Fan Guidong, a consultant from Landing Law Offices LLP (India) told Yicai Global. In the past, enterprises had to consider various states' special tax rates and pay duties when goods were transported across state borders, Fan said. "The new tax reform is definitely a huge step forward," he said. It will save businesses a lot of time and money on making declarations and payments and filing returns, said Fan.

The new tax rates will probably reduce our operating costs by around 5 percent, said Li Rongxiang, a project manager from Shanghai Tunnel Engineering Co.'s India affiliate Shanghai Urban Construction India Infrastructure Co. told Yicai Global. "In the past, the local tax rates were different," Li said. "Purchasing materials from other states made calculations difficult, so sometimes we were reluctant to make out-of-state purchases." After the tax rates are unified, it will be more convenient to move goods from state to state, said Li.

The GST set out four different rates -- 5 percent, 12 percent, 18 percent and 28 percent. Basic goods will be taxed at the lowest rate, and the highest rate will be levied on luxury items. Home appliances including refrigerators, air conditioners and dishwashers will be taxed 28 percent.

Haier India is looking forward to the tax reform in India. "In the past, the tax rates and tax systems in each state were different, and goods moving across state lines were taxed," said Huang Decheng, product director of South Asia (India) of Haier Group. "We had to set up warehouses in each state, with corresponding financial personnel and managers. The management process was lengthy, and the cost was very high. Now there is one single tax rates throughout the country, and a unified market has been gradually formed. Now we can merge and streamline some of our warehouses and offices. Costs will be greatly reduced and management will be much simpler."

After the new tax rates are implemented, Haier India's operating costs are expected to be reduced by about 1 percent, per Huang's preliminary estimates.

Local governments are not fully prepared for the new tax system reform, Huang said. The official implementation of the GST tax reform was expected to be postponed to September as the central and local governments were disputing how tax revenue should be distributed, but the government of India said in early June that the new tax system must be implemented from July 1.  

"The new tax reform covers almost 90 percent of enterprises, and they need to apply the new tax system," said Huang. "Tax operations needs to be standardized and infrastructure must be upgraded."

The reform, which has taken more than ten years to be implemented, is an important move for India to improve its business environment, but the country needs time to adapt to the change, Fan said. As with the scraping of big bills, the impact on the public and industry will become apparent with time, he said.