The Indian elections, due to be staged over the summer, are expected to usher in a government able to finally implement the much delayed new Goods and Services Tax (GST).A report this week from UBS highlighted the introduction of the new GST regime as one of the major objectives being delayed until after this year elections. It believes that all the contentious issues around the revenue share of the new tax between the Centre and 28 States have been resolved. Once the election has been completed, subject to a shock result, any of the likely winners will want to publish a final bill and push for implementation in 2015.
The new GST system could add over 1% to India GDP, and spur export and intra-State trade. The new tax will have a single compliance regime, including one return and tax number. It would also help boost revenues as the tax net would be extended, and there would be less scope or incentive for tax fraud. The system envisaged would be a big step forward in creating a common economic market for the States.You can read about Indian VAT and GST reform here.
Currently, there are several indirect consumption taxes in India. They includesIndian VAT at rates varying between 5% and 20% on goods levied individually by the 28 states,CENVAT at 12.36% charged by the central government on goods and Service Tax levied on services, including financial services, at 12%.These taxes often overlap, and can be compounded through the production chain. Many transactions may be taxed twice where there is an element of intra-State trade.