India GST friction on Entry Taxes

Mon 24th Nov 2014

As negotiations progress on the planned 2016 implementation of Indian Goods & Services Tax (GST) reform, new frictions have emerged over the treatment of Entry Taxes.

Indian Entry Taxes

Entry taxes are effectively import taxes on goods moving between Indian states. The regime, introduced in 2000, enable the state of destination to charge the company moving goods into their state levy based on the types of goods. Rates vary from 1% to 19% depending on the nature of the goods and the State.

Indian Centre proposes control

In the latest round of negotiations between the Indian government, ‘Centre’ and the States, the Centre will propose taking control of all such taxes. The States had previously insisted on retaining direct administration of these taxes as concession to giving up control of other Indian VAT taxes where are being reformed via the new GST regime.

A block to free movement of trade

Entry Taxes account for over 14% of States’ annual revenues. However, the represent one of the most criticised elements of the current antiquated Indian VAT regime since the tax the movement of goods and so undermine free trade within India.

It is hoped that GST will boost the Indian economy by over 1% by simplifying the compliance burden and reducing instances of double taxation.

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