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INDIA: Legislation Paves Way for Rationalisation of Indirect Taxation

Four supplementary bills are set to be adopted in the run-up to the July 1 enactment of the Goods and Services Tax (GST), the centrepiece of the Indian government’s bid to rationalise the country’s fragmented indirect tax system. The four new bills – The Central Goods and Services Tax Bill, The Integrated Goods and Services Tax Bill, The Goods and Services Tax (Compensation to States) Bill and The Union Territory Goods and Services Tax Bill – now have to also be adopted by the legislature of each of India’s 29 constituent states.

While these bills pave the way for the implantation of the GST, there is yet to be a formal announcement as to which of the proposed four tax tiers a number of individual goods and services are to be allocated. Under existing proposals, the tax will be levied at the rates of 5% (mass consumption items, including spices, tea, coffee and edible oil), 12% (computers, processed foods), 18% (soaps, oil, toothpaste, smartphones, and refrigerators) and 28% (most white goods, cars, tobacco and aerated drinks). There will also be a premium tax rate in excess of 28% reserved for certain designated products, including tobacco and luxury cars. A number of products and services deemed to be essential items – such as rice, education and healthcare – will be zero-rated.

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