5 Aug 2016
INDIA: Legislation Set to Harmonise Indirect Tax System and Boost Ease of Doing Business
The upcoming Goods and Services Tax (GST) legislation has been designed to harmonise India’s fragmented indirect tax system, while also stimulating foreign investment and improving the ease of doing business in the country.
In more specific terms, the GST will supersede a number of existing current indirect taxes, including the State Value Added Tax, Service Tax, Central Excise Duty, Central Sales Tax and Luxury Tax. It will also introduce a unified tax system and create a single market, allowing for freer movement of goods and services across the country.
Certain items, however, will remain exempt from the GST’s remit. These include petroleum products, entertainment taxes levied by state bodies, customs duty, tax on alcohol consumption and tax on the consumption and sale of electricity.
Following its official endorsement by both of India’s houses of parliament, the GST bill will need to be ratified by the legislatures of at least 15 of India’s 29 states. Given the complexity of the approval system and the requirement for extended legislation, the new measures are not expected to be implemented until 1 April 2017.