Indian budget likely to signal move to Goods & Services Tax GST

Thu 3rd Jul 2014

Following this Spring’s Indian elections, and the victory by the business-friendly Narenda Modi, it is anticipated that the 2014/15 budget will signal fresh plans to implement Indian GST.

The current Indian VAT, Service Tax, CENVAT and other indirect taxes are complex and often overlap, resulting in high tax burden on manufacturing and a deterrent to trade across State lines. GST, based on the OECD Guidelines for VAT/GST, has long been promised, and offers a potential 1%+ boost to India’s flagging GDP.

Breaking the Indian Central and State Deadlock

It is likely that the budget will deal with the knotty issue how to compensate the States for the loss of local revenues from the exciting consumption tax regime. This has held-up the most recent attempts to introduce GST, with arguments on the split of a single, national tax between the Delhi Central Government and the States.

A single taxing authority

A secondary issue with be the creation of a single tax office, potentially merging the two main direct and indirect tax authorities.