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The New India GST

Tax Law Alert David Brunori, Dawn R. Gabel

The Indian government recently enacted a new tax regime—the Goods and Services Tax (GST). The new law is the most dramatic tax reform in Indian history and will affect all aspects of the economy. Essentially, the GST is a value added consumption tax similar to those imposed throughout most of the world. The GST will affect the tax liabilities of virtually all businesses operating in India.

The Highlights:

  • GST is a destination based consumption tax which simply means that the tax liabilities fall on the purchasers.
  • The tax is levied at all stages—on all purchases.
  • Businesses can claim input tax credits to recover the tax they paid.
  • Unlike consumption taxes around the world, the GST applies to most services.
  • Exports are exempt from tax—purchasers of goods and India do not pay tax.
  • Businesses in India that have paid the GST on intermediate goods before export may in certain circumstances be entitled to a refund.
  • All imports of goods and services into India are subject to GST.
  • Sellers are responsible for collecting the GST and remitting it to the government.
  • But many US companies selling into India will not have to collect the tax.
  • GST rates range from 0-28 percent and vary by good and service

If you do business in India and have questions about the new law contact David Brunori at [email protected]/(202) 780-2634 or Dawn Gabel at [email protected]/(602) 230-4630.