Destination India 2019

30 September, 2019

India is the seventh-largest economy in terms of GDP and aims to grow into a USD 5-trillion economy by 2024-25, which will make it the third-largest economy in the world. The Indian economy is classified into three sectors: Agriculture and allied segments, Industry and Services. At current prices, all sectors except Agriculture have registered a growth rate of over 9.0%.

Key Developments

The following are some of the key developments over the past 12 months which account for India’s growth:

  • Indian Foreign Direct Investment Reforms
    In India, Foreign Direct Investment (FDI) is a major driver of economic growth and a source of non-debt finance for economic development. The Government has put in place an investor-friendly policy, under which Foreign Direct Investment in India up to 100% is permitted through the automatic route in most sectors and activities.

  • Ease of doing business
    As a result of continued efforts by the Government, India’s Ease of Doing Business (EODB) ranking has recorded a jump of 23 positions on its rank of 100 in 2017 and now ranks 77th among 190 countries assessed by the World Bank.

  • Infrastructure
    The Infrastructure sector has become one of the largest focus areas of the Government. The Government plans to invest INR 100 lakh crores in infrastructure over the next 5 years and aims to ensure power connectivity through ‘One Nation, One Grid’.

  • Recapitalisation of banks
    In October 2017, the Government announced a major recapitalisation drive to the tune of INR 2.11 lakh crore by utilising three channels – the Budget, market borrowings and issue of recapitalisation bonds.

  • e-Governance in Digital India
    The Government has now started implementation of digital/e-Governance projects in India to make its functions more transparent and efficient, and ease citizens’ interactions with it.

The Government has reduced the corporate tax rate in India to 25% for certain eligible companies. In the past few years, India has also introduced certain measures unilaterally, in line with base erosion profit sharing (BEPS) recommendations, in its domestic tax law to counter base erosion.

Scope of taxable income of a company

In India, the corporate tax rate for a resident company will be as per its global income in the country. A company that is resident outside India (non-resident company) is taxed in India in respect of:

  • Income that accrues or arises in India
  • Income that accrues to the non-resident company from a ‘business connection’ in India, an asset or source of income in the country, or by transfer of a capital asset in the country
  • Income received or deemed to have been received in India
Corporate tax rate in India

The tax year in India starts from 1 April of one year and ends on 31 March of the subsequent year. Companies are required to file their return of income in India for a particular year as per the specified due dates.

In India, corporate tax rates for entities range from 25% to 40%. The corporate tax rate in India is increased by a surcharge, which varies depending on the quantum of the income and nature of the entity. There is an additional levy of health and education cess at the rate of 4% on the tax amount and surcharge, if applicable.

The Goods and Services Tax was implemented on 1 July 2017 and received overwhelming support from industry. It has afforded India Inc. an opportunity to simplify and create value for key business processes, including procurement, manufacturing, distribution and logistics.

The Goods and Services Tax is a consumption-based tax. Consequently, revenue for a transaction accrues, based on rules of the consumption or destination state, unlike under the past Indian Indirect Tax regime.

Taxes applicable under the Goods and Services Tax include the following:

Tax type
Levied on
Levied by
Central Goods and Services Tax (CGST) Intra-state (within the state) supply of goods and services
Central government
State Goods and Services Tax (SGST)* Intra-state (within the state) supply of goods and services State government
Union Territory Goods and Services Tax (UTGST)* Supply of goods and services in a Union Territory Central government
Integrated Goods and Services Tax (IGST)
  • Inter-state supply of goods and services
  • Import of goods and services
  • Supplies to units and developers of Special Economic Zones (SEZs)
Central government

Rates under the Goods and Services Tax schedule

Essential items have been included in the 0% tax slab, most goods and services in the 18% bracket, and specified luxury goods or services and ‘sin’ goods in the 28% slab. In addition, identified luxury goods and services are also liable to Compensation Cess.

In the Union Budget 2019, the re-elected Government announced several policy measures with a short and long-term focus, including liberalisation of norms around foreign investment in India, a continued push on building India as a global manufacturing hub and infrastructure development, among other things.

The FDI policy covers 27 sectors and activities with sectoral caps or conditions for receiving foreign investment in India.

Some of the key developments over the past 12 months are discussed below:

  • Liberalisation/rationalisation of norms around foreign investment in India in sectors like insurance intermediaries, Single Brand Retail trade, coal mining activities, etc.
  • Rationalisation of concentration norms for investment in corporate debt by foreign portfolio investment in India.
  • The reporting mechanism for FDI has been further streamlined by the RBI through introduction of a dedicated portal for all compliances related to foreign investment in India.
  • Rationalisation of reporting requirements for Indian Foreign Portfolio Investment.
  • Amendments to the Insolvency and Bankruptcy Code to ensure smooth implementation of the law.
  • Overhaul of the cross-border borrowing and lending guidelines through RBI’s revised framework on External Commercial Borrowing and rupee (INR) denominated bonds.

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