India has a well-developed tax structure with a 3-tiered federal structure. These government bodies levy taxes and duties in line with the Indian Constitution:
- union government
- state governments
- urban and rural local bodies
The union government levies the following taxes and duties:
- Income tax
- Central goods and services tax
- Customs duty
- Integrated goods and services tax
State governments levy the following taxes and duties:
- agricultural income tax
- sales tax on intra-state sales of goods
- stamp duty on transfer of property
- state excise on manufacture of alcohol
- land revenue for agricultural or non-agricultural purposes
- entertainment duty
- tax on professions and callings
Urban and rural local bodies
Local bodies levy the following taxes and duties:
- property tax
- octroi – tax on entry of goods for use or consumption in local area
- market tax
- utilities tax
Goods and services tax
India reformed its Goods and Services Tax (GST) in 2017. This was part of easing its complex, multiple indirect tax regime.
Goods can now be transported across the county seamlessly without multiple checkpoints. This makes it quicker and easier for companies to reach consumers.
Goods and services are categorised under a structure with 5 different rates: 0%, 5%, 12%, 18% and 28%. You can find the tax rates that apply for your goods and services on India’s Ministry of Finance website.
Customs duty on import and exports of goods is a centralised levy. There are 5 types of custom duties on imports to India:
- Basic Custom Duty (BCD)
- Social Welfare Surcharge
- Countervailing Duties (depending on the HS codes)
- Integrated tax
- GST compensation
Find out more on Customs in India on the Customs National Trade Portal.
Importing of services
GST is payable on all taxable supplies rendered in India, including supply of services.
GST is generally a destination-based tax, so 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.
Tax avoidance agreement
India and Australia have an agreement for the avoidance of double taxation and the prevention of fiscal evasion.