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India to Start GST Implementation in July

taxationWhy implement GST?

India’s complex tax system has been a major challenge for foreign investors. India has 27 states; each state has its own government and parliament and they have the right to their own jurisdiction of the goods, services, the implementation of different tax rates and tax law.

Among them, most taxes are collected twice by both the central and local government agencies. The taxes that Indian taxpayers used to pay in the past are: national value-added tax, central consumption tax, service tax, transit tax, city tax and other complicated indirect taxes. This has a lot of adverse effects on market transactions, which is an important reason why the Modi government has been pushing for GST tax reform since it came into power.

How will implementing GST affect India

There are definitely more pros than cons to implement GST in India. Over the years, India’s complex and messy taxes have discouraged many investors. Now, it is expected that the implementation can effectively improve existing problems so that consumption tax is more uniform and clear.

The adoption of the GST will bring the following benefits:

  • Increase the work efficiency of the country and its government sectors
  • Duplicated taxation is eliminated
  • A unified tax system will make India a unified market
  • Once tax rates for goods and services are unified, many tax disputes can be resolved (e.g. the controversial debate of if hotels are providing services or goods)
  • GST reduces the burden that manufacturing industry face and helps improve their domestic and international competitiveness
  • National tax information will be digitalised to effectively reduce tax evasion
  • Avoid using tax rates to engage in malicious competition between states
  • Simplifies tax processes and operating costs

It is worth mentioning that all businesses in India will benefit from the new consumption tax, especially start-ups and SMEs.

Cons of implementing GST

The passing of GST bill is a good thing but this is not the case for some industries. For example, the media, textile and telecommunications industries are subjected to a steep increase of tax rate. Also, some enterprises especially the service industry will experience higher operating costs.

The adoption of the GST will bring the following drawbacks:

  • Service-related tax rates will increase significantly (14% – 20%)
  • Retail tax rate has nearly doubled
  • Imported goods will be taxed at a higher rate (around 6%)
  • Taxes will be controlled by the central and local government agencies. Companies will have to interact with both authorities, increasing its operating costs
  • All relevant processes will be carried out on the GST network system, making it difficult for small businesses to operation

Perfect timing for Singapore businesses to enter India

India’s market has always been extremely challenging due its complex tax system and remain prohibitive for many foreign companies. With the implementation of new GST tax, it is expected to strengthen the confidence of investors.

If India is able to replace the local taxes of at least 17 provinces and the taxation of India’s central federal government with GST, all overseas enterprises will save on unnecessary costs when selling their products across India and is easier for them to expand their business.

This is definitely good news to Singaporean businesses as India’s market is massive and has showed spectacular growth, even overtaking Singapore and China to become an emerging market with unlimited potential. It will certainly become one of the key markets that large companies are planning to enter.

According to India’s local and international financial institution’s prediction, GST is expected to boost India’s economic growth by 1-2 percent.

 

 

印度GST  7月1日起上路实施

为何推行GST?

印度复杂的税收体系一直是困扰着外国投资者的一大难题。印度有27个邦,各邦都有各自的政府和议会。各邦也都有权力对自己所管辖的商品、服务实施不同的税率和税法。其中,有很多税是被中央和地方重复征收的,印度纳税人过去需要缴纳的税种有:国家增值税、中央消费税、服务税、过境税、入市税等各种繁杂的间接税种。这对市场交易产生了很多不利的影响,这也是莫迪政府掌权以来极力推行GST税法改革的重要原因。

推行GST对印度的影响

GST的推行,对印度而言,绝对是利多于弊。一直以来,印度的税务过于复杂烦乱,让许多的投资者望而却步。如今,GST的推行,可望有效改善一直以来存在的问题,让消费税更加统一清楚。

GST法案的通过将带来以下的好处:

  • 提高了国家及政府部门的工作效率
  • 重复收税现象被消除
  • 统一的税制将使印度成为统一的市场
  • 商品和服务的税率得到统一,很多税务争议得以解决(比如印度酒店业提供的是服务还是商品,一直存在争议)
  • GST减少了制造业税务负担,有助于提高印度制造业的国内和国际竞争力
  • 全国税务信息将会联网,可有效降低逃税行为
  • 避免了各邦之间利用税率搞恶意竞争
  • 简化了税务流程和运营成本

有一点值得重点提及,就是印度所有企业都会从新的消费税中获益,初创企业和中小企业尤其值得高兴。

GST也有其不足之处

虽然GST法案通过是好事,但是对于某些行业则不然。比如,媒体、纺织、通信等行业相关税率比例提升过高。此外,部分企业尤其是服务业的运营成本会有所增加。

以下为GST的不足之处:

  • 服务相关税率会显著上升(14%-20%)
  • 零售业税率上涨了近一倍
  • 进口商品税率将会按照高位标注征收(6%左右)
  • 税收将会被中央和地方共同控制,企业要同时应对两方的管理部门,营运成本会增加
  • 所有相关流程都会集中在GST的网络系统上操作,小企业操作起来存在困难

新加坡企业进军印度的好时机

印度的市场,一直以来都深具挑战性,因为其复杂的税务体制,让许多的外国企业,不敢踏入其中。但随着新的GST税务的推行,有望加强投资者的信心。

一旦印度以GST取代至少17個省的地方稅和印度中央聯邦政府的課稅,將讓所有外国的企業,在印度跨省銷售產品時,省去許多不必要的成本,也更容易在印度拓展業務。

这对于新加坡企业而言,绝对是一项利好消息,毕竟印度的市场何其庞大,而且成长惊人,甚至超越新加坡和中国,成为一个潜力无限的新兴市场,必定会成为各大企业主要进军的国家之一。

根据印度当地及国际金融机构的测算,GST 有望带动印度经济增速提高1-2个百分点。