India: easier business thanks to a major tax simplification

A Very important new tax legislation in India passed by the Indian government for growth. Last August 3, the Upper House of the Indian Parliament approved the GST (Goods and Services Tax, or the tax on goods and services), which already takes the form of a one of the biggest legislative reforms enacted in India since the opening of the economy in 1991. The current finance minister, Arun Jaitley, has indicated that the new law will enter Effective as of April 1, 2017, coinciding with the new fiscal year.

This was a measure first proposed in fiscal year 2006-07, but it ran into a series of difficulties at that time and was never implemented again; ten years later the Modi government, after months of difficult negotiations, managed to get it approved and achieve this important goal.

GST promises to be. Of particular importance to the Indian economy. Specifically, through the implementation of this reform, it is intended to replace all existing indirect, local and central taxes (including Excise Tax, Sales Tax e Service Tax) With a single lower tax, the GST precisely: this will make it easier to implement the necessary tax controls, Discouraging tax evasion.

But how it will work From a practical point of view?

GST takes the form of a consumption tax and Will be applied to goods and services at the time when final consumption occurs: will be included within the price of value-added goods and services, at each and every step of the purchase or sale of goods within the entire production chain. The manufacturer, wholesaler or retailer will pay this tax, which can, however, be refunded since it is subject to tax deduction; therefore, it will be the final consumer who will actually pay the tax. Through this mechanism the “cascading effect” of taxation will be avoided by avoiding paying tax upon tax.

New Delhi's goal is to. create uniformity: GST will in fact be unique for all goods and services, thus the Central Government and all Indian states will tax goods and services with the same tax. For example, if 20% is the percentage granted for a certain good, the Central Government and the states will both collect 10% and the revenue obtained will be divided between the two parties.

In this regard, it has been calculated that the effect of introducing GST could lead to a price reduction of 16%: this will result in a likely increased consumption and employment and in a increased foreign investment.

This the process planned by the government for the final implementation of the law:

• approval by the assemblies of the federated states of India. Currently, there are eight states that have already passed the law (Delhi-NCR, Madhya Pradesh, Assam, Bihar, Jharkhand, Chhattisgarh, Gujarat, and Himachal Pradesh), and now it will be necessary for the Legislative Assembly of each individual state to pass its own GST-related bill, since each individual state will be able to make its own internal decisions on the matter;
• Creation of a special committee for GST, that is, a council body that will be in charge of deciding on measures to be taken regarding taxation, rates and exemptions.

The Modi government, after the campaign Make in India and the measures included in the latest Budget, continues in its path of strong economic change in the country, with the aim of Create an increasingly open, dynamic and business-friendly environment. The implementation of this major tax reform in India will facilitate the growth of the economy, increase domestic consumption and facilitate foreign trade relations, attracting many international investors.

If want more information in to the new tax regulations in India and if would you like to learn more about Octagona's operational activities, contact us at the telephone number 059.9770184 or to the e-mail address [email protected]: you will receive all the information you need.

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