Taxation

India has a well-developed tax structure with a three-tier federal structure:

  • union government
  • state governments
  • urban/rural local bodies.

The power to levy taxes and duties is distributed among the three tiers of government, in accordance with the provisions of the Indian Constitution.

The main taxes/duties that the union government is empowered to levy are Income Tax (except tax on agricultural income, which the state governments can levy), Customs Duty, Central Excise Tariff and Service Tax.

The principal taxes levied by the state governments are sales tax (tax on intra-state sale of goods), stamp duty (duty on transfer of property), state excise (duty on manufacture of alcohol), land revenue (levy on land used for agricultural/non-agricultural purposes), duty on entertainment and tax on professions and callings. The local bodies are empowered to levy tax on properties (buildings, etc.), Octroi (tax on entry of goods for use/consumption within areas of the local bodies), tax on markets and tax/user charges for utilities like water supply, drainage, etc.

Excise duties are levied on a wide range of items manufactured in India. On imported goods this is known as countervailing duty.

Goods & Services Tax (GST)

Effective July 1, 2017, India has implemented a comprehensive goods and services tax (GST) in an effort to modernize and streamline its tax net. This consolidation of various federal and state-level taxes into a single GST is an important step toward simplifying India’s tax regime.

Under the GST regime, Article 269A constitutionally mandates that supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce.

Import of Goods

The import of goods has been defined in the IGST Act, 2017 as bringing goods into India from a place outside India. All imports shall be deemed as inter-State supplies and accordingly integrated tax shall be levied in addition to the applicable Custom duties.

Import of Services

GST is payable on all taxable supplies rendered in India, including supply of services. Because GST is generally a destination-based tax, it’s imposed at the place of supply. Service importers will need to self-assess GST under a reverse-charge mechanism if their service provider isn’t registered for the tax.

Read more about imports in the GST regime at http://www.cbec.gov.in/resources//htdocs-cbec/gst/51_GST_Flyer_Chapter23.pdf;jsessionid=655F932F14CC62A7DC5E106293B24479

More information on GST is available at http://www.cbec.gov.in/htdocs-cbec/gst/index

Double Taxation Avoidance Agreement & Withholding Tax

There is an agreement between the Government of the Republic of India and the Government of Australia for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. Read more at https://www.incometaxindia.gov.in/dtaa/comprehensive%20agreements/108690000000000004.htm & https://www.incometaxindia.gov.in/pages/international-taxation/dtaa.aspx