New Indian Goods and Services Tax Regime in Place by 2010
May 26 – The Indian government is studying tax reforms that will sweep away part of the current VAT system, a variety of state level direct and indirect taxes, excise duties, service tax and luxury tax and replace them with a single Goods and Services Tax (GST).
The GST will require legislative and constitutional changes in order to pass into law taking about ten months to prepare, get onto the statute and make necessary administration changes. The predicted rate for the proposed GST is said to be 20 percent.
This should create a national tax standard across the country with consumers paying a single rate of GST across India. The target date for implementation is the 1st of April next year to coincide with the start of the new fiscal year.
Once the GST is implemented, all other state and central level taxes, including VAT, excise duty, service tax and luxury tax would be abolished. Customs duty will be levied out of GST and is likely to be replaced by VAT on imports.
Currently, the various Indian states levy VAT at a 4 percent or 12.5 percent rate depending on the type of goods, with excise duty usually levied at 8 percent for most commodities. Services are taxed at 10.3 percent.
The new GST system will make the payment and collection of taxes easier and reduce manufacturing costs. Petroleum products and liquor are however likely to remain outside the GST structure.
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