VAT in India
Updated on Wednesday 28th February 2018
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The value added tax (VAT) is imposed to all goods and services traded on the Indian market. In July 2017, India introduced a new legislation, through which the local authorities modified the manner in which natural persons and legal entities are imposed with this tax. In that month, the VAT in India was changed into Goods and Services Tax (GST), a similar tax applicable to the supply of goods and services, which introduced a more efficient system.
Investors who want to register a company in India will be liable to GST and they will need to register with the local tax authorities. One of the main benefits of the GST legislation refers to the fact that it replaced several indirect taxes on the supply of goods and services, thus reducing the overall manufacturing and sale costs. Our team of specialists in company formation in India can offer assistance on the taxation of legal entities, including on the Indian GST.
Main purposes of the Indian GST legislation
The newly introduced legislation on the taxation of goods and services simplified the manner in which this tax is collected by the local authorities. It replaced approximately 20 taxes, including several duties.
The main purposes of the GST legislation were the following:
• simplify the tax compliance applicable to companies operating in India;
• reduce the level of double taxation in the case of indirect taxes;
• increase the activities of the manufacturing sector;
• reduce the cascade effect on the taxes applied to goods or services sold in India.
GST rates in India
GST in India is slightly different that the VAT, in the sense that in this country VAT was available only for sale of goods. However, GST is imposed to both goods and services and it benefits from a uniform pricing system. Our team of consultants in company registration in India can offer legal advice on the legislation in the field.
Investors interested in starting a company in India must know that both services and goods benefit from the same categories of GST rates.
Under the new law, GST is imposed at the following rates:
• 0% - basic food products (cereals, milk, salt).
Certain categories of services are also exempt from taxation, as follows:
• residential accommodation.