As of July 1, 2017, India has introduced a new GST system to replace nearly a dozen central and state levies into a single national sales tax. The GST shifts India to a destination-based tax system for cross-border supplies in contrast with the existing origin-based tax regime. Although the new nationwide system in essence simplifies the various current systems, three separate GST levies and multiple VAT rates still exist.
A dual GST consisting of Central GST (CGST) and State GST (SGST) is levied on a common base, with an Integrated GST (IGST) on interstate supplies and imports. CGST and SGST will apply to most supplies of goods and services, with some key exclusions. Drawing or coloring books alongside stamps, judicial papers, printed books
Most of the goods and services will be taxed at either 5%, 12%, 18% or 28%. Adding to the complexity, however, is the fact that some items have exclusive tax rates, while others have been exempted from taxation. Exempted items include fresh meat, fish, chicken, eggs, milk, buttermilk, curd, natural honey, fresh fruits and vegetables, flour, bread, salt, hulled cereal grains, human hair, bangles, drawing or coloring books, stamps, judicial papers and printed books.
Comprehensive listings of goods and services that fall under each tax category can be found here.
Impact on businesses operating in India
Organizations that include a local entity in India, or are VAT-registered in India, will be affected by the new regulations for applying GST to their supplies.
While businesses stand to benefit from this ambitious indirect tax reform over the long term, many will face new obligations and compliance challenges, including mastering the new filing requirements and adjusting bookkeeping systems to meet the new regulations. Accounting systems may need to be overhauled altogether, driving one-time investment costs and chaos in the short term.
Recognizing the significant challenge that the complex reform poses to businesses, the government has announced that it will allow firms to file simplified returns for July and August. However, from September they must file a total of 37 online returns annually ‒ three each month and one at the year’s end ‒ for each state they operate in.
The government has established a Goods and Services Tax Network (GSTN) ‒ a system that will act as an interface between taxpayers and the government, allowing business owners to register their company, file taxes, and upload invoices easily online. In addition, it has also allowed third-party service providers, such as VATBox, to integrate with the GSTN system for providing innovative and convenient services to taxpayers.
In this nascent and highly complex VAT market, it is critical to stay on top of the new rules and regulations. If the prospect seems daunting, help is available. VATBox stands ready to assist your organization with streamlining the new VAT reporting requirements in India and around the world. VATBox enforces a single global process across all entities, using automation and built-in domain expertise to improve compliance and significantly increase the returns of both foreign and domestic VAT. VATBox’s technology processes every piece of data, large or small, providing data integrity at the highest level. A sophisticated knowledge base accurately applies all the relevant country rules, regulations, and best practices.
For more details on how we can make the GST transition completely seamless for your organization, please contact us.