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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%.
The following are some of the key developments over the past 12 months which account for India’s growth:
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.
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:
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:
|Central Goods and Services Tax (CGST)||Intra-state (within the state) supply of goods and services
|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)||
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: