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India’s Indirect Tax: GST - Introduction

List of news

1. Introduction
On 23 May, 2017, we had “Expand Business in India Seminar”, with our co-sponsors, the Bank of Tokyo-Mitsubishi UFJ, Ltd, Recruit Holdings Co., Ltd., and KNM Management Advisory Services Private Limited. At the seminar, India’s Goods and Services Tax (GST) mainly caught participants’ interest. In this News, we will mention introduction to GST.

2. Current Situation and Background
It is said that India’s taxation, especially its indirect tax system, is very complicated. As shown in the below table, there are various types of indirect taxes. Tax rates differ by state, and each tax needs to consider the possibility of offset and deduction. Starting from July 1, GST introduces a single tax across the nation and becomes a breakthrough for investors to step into India’s market timely.

3. Benefits of GST
Currently, there are various types of indirect taxes that are levied by the Central and State governments. GST will subsume most of the Central and State taxes into one indirect tax. The details are as follows:

GST, the biggest tax reform in India, brings the following economic benefits:

(a) Simplified compliances
Inter-state transactions have been in difficulties as if such transactions were made across the border. GST, a comprehensive indirect tax system, is expected to remove complex tax regulations, simplify compliances and lower business costs. As a result, it will reduce prices for consumers.

(b) Unifying India’s market
Before the GST system, state-based tax regime inhibited transactions across the states. GST will bring India one unified common market, which will reduce cascading of taxes and facilitate seamless movements of goods.

(c) Gain to manufacturers and exporters – phasing out of Central Sales Tax (CST)
GST is not applied to goods or services exported from India, which is beneficial for export oriented business and expected to boost Indian exports. Also, elimination of CST will reduce tax costs and enable more strategic transactions of goods for manufactures and exporters.

However, as a matter of fact, GST remains some pending issues such as the rebuilding of the tax system and the introduction of IT technology. In a short term, companies might have to burden the introduction costs for GST. But in a long term, GST, simplifying India’s tax system, will effectively create better business fields for the whole nation and increase more investment from overseas.

4. Conclusion
In this News, we have mentioned “India’s indirect tax: GST – Introduction.” At present, India is still in the process of constructing the GST system, and some of the treatments are not clear yet.
Please note that this News only introduces general outlines and does not include professional advice. So please make sure not to make any decisions without taking professional advice individually. If you have any questions, please feel free to contact us.