India GST at 18%

Tue 1st Dec 2015

Whilst there remains uncertainty as to the exact date of the implementation of India’s new Goods and Services Tax regime, there appears to be agreement that headline rate for the consumption tax will be 18%. India may also propose a reduced GST rate for some essential services.

GST implementation delays

The last deadline for the introduction of GST was 1 April 2016. However, a dispute between the ruling BJP and opposition Congress parties looks to have pushed this out until at least 1 October 2016, or perhaps to 2017. Talks on the tax are currently stalled in the upper parliamentary house. The Congress party is pushing for an 18% upper cap on GST, and a withdrawal of the compromise 1% tax surcharge for states with large manufacturing bases set to lose out under the new regime.

Despite the uncertainties of the launch date, the joint panel reviewing the details of the implementation of the tax is believed to be close to recommending a revenue raising neutral level of 18% – although it may go lower.

Indian VAT replaced

Indian GST will replace a collection of taxes, including: VAT, CENVAT, Service Tax and Professional Services Tax. These taxes impose complex compliance obligations on companies, and include double taxation on inter-State trading of goods. It is hoped the simplification of all the taxes into GST could boost India’s GDP by 2% per annum.



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