Goods and Services Tax (GST) in India a Real Possibility for 2017

Yujin Weng
September 2, 2016

Since the beginning of the new Millennium, India has repeatedly flirted with the idea of imposing a nationwide Goods and Services Tax (GST). However, legislative activity that has taken place over the last few weeks indicates concrete momentum towards this long-standing goal.

The GST Constitution Amendment Bill

The GST Constitution Amendment Bill (GST Bill) passed the Lower House (Lok Sabha) in May 2015 and passed the Upper House (Rajya Sabha) on August 3, 2016, with further amendments. On August 8, 2016, the Lok Sabha unanimously approved the amendments, meaning the bills are aligned and the path is clear for a complete re-design of indirect taxation in India. With the force of the empowering constitutional amendment behind it, a national GST may take effect as early as April 1, 2017.

The proposed national GST in India aims to replace a hodgepodge of existing federal
and state levies on supplies of goods or services.

Current Indirect Taxes in India

The proposed national GST aims to replace a hodgepodge of existing federal and state levies on supplies of goods or services. Currently in India, each state administers its own value added tax (VAT) law that applies to supplies of goods within the state. There is no uniform standard VAT rate among the states. A Central Sales Tax (CST) applies to interstate supplies of goods, which in essence sources the transaction to the state of origin for VAT.

At the federal level, the central government currently administers a Service Tax of 14%. Taxable services are also subject to a Swachh Bharat Cess of 0.5% and a Krishi Kalyan Cess of 0.5%, which are special-purpose federal taxes to fund improvement of sanitation and agriculture respectively.

Miscellaneous federal and state levies also currently populate the India taxation landscape, such as:

  • Central Excise Duty
  • Countervailing Duty
  • Customs Duty
  • Central and state surcharges and cesses with respect to supply of goods and services
  • Entry tax

Each of these levies applies based on a different set of rules and currently adds to the complexity of doing business in India.

How GST Works

GST will be a uniform value added tax on supplies of both goods and services nationwide. It will replace the federal and state levies currently in effect on goods or services (with the exception of Basic Customs Duty). Under GST, tax is sourced at destination.

Intrastate Supplies

According to the Draft Model GST Law published by the India Ministry of Finance, with respect to a taxable supply that takes place entirely within one state, GST will consist of two elements:

  • Central GST (CGST)
  • State GST(SGST)

The taxation structure of intrastate supplies is similar to that in the Canadian province of Quebec where the federal GST and provincial Quebec Sales Tax (QST) basically apply to the same tax base, but remain two distinct taxes.

Interstate Supplies

A single combined rate of Integrated GST (IGST) will apply to interstate taxable supplies. IGST is analogous to Harmonized Sales Tax (HST) in Canada, which is a single rate combining the federal and provincial sales taxes in a given HST province. One of the major amendments to the GST Bill made in the India Upper House is elimination of a proposed additional 1% tax on interstate supply of goods.

Next Steps

The next step is for the GST Bill to be ratified by a majority of states. As of September 1, 2016, 16 states have ratified the GST Bill, meeting the required majority for subsequent Presidential Assent of the Bill. Both the federal government and states will need to pass GST-enabling laws before the target date of GST rollout on April 1, 2017.


Some key details of the model GST law still need to be worked out, most notably the standard rate. However, this is the most positive momentum toward a centralized tax system in India that we have ever seen. Sovos Compliance is closely monitoring the situation and will make all the necessary changes in our global tax calculation engine to keep our clients compliant.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.


Yujin Weng

Yujin leads a team of attorneys that focus on global VAT determination, leveraging her ten-plus years of experience with indirect taxes at Sovos. Yujin is a member of the Massachusetts and New York Bars, has a J.D. cum laude from Boston University School of Law, an M.A. from Syracuse University, and a B.A. from Nanjing University (China). She is fluent in Chinese.
Share This Post

North America ShipCompliant
May 25, 2023
Out-of-State Breweries Gain Self Distribution, DtC Rights in Oregon

Under a settlement agreement, breweries located outside of Oregon now have more options for selling into the Beaver State, including direct-to-consumer (DtC) shipping and self-distribution to retailers. The settlement arose out of a lawsuit filed by a group of Washington breweries last year challenging Oregon laws that limited beer self-distribution to in-state breweries and DtC […]

EMEA VAT & Fiscal Reporting
May 24, 2023
VAT and Art: What you need to know

Significant inflation increases have impacted most of the world’s economies, with the UK still above 10% in 2023. This increase means a reduction in the purchasing power of consumers. Together with increases in the cost of raw materials, this has created uncertainty regarding growth of entire industrial departments and reduced profit margins for companies. The […]

North America ShipCompliant
May 23, 2023
Top 5 Myths Surrounding Retailer Direct-to-Consumer Wine Shipping

By Tom Wark, Executive Director, National Association of Wine Retailers Politics breed myths. This has always been the case as politics is, at its most fundamental, a form of storytelling. So it should be no surprise that myths have arisen as various elements of the wine industry have fought against consumers and specialty wine retailer seeking […]

May 23, 2023
IPT: Location of Risk and Territoriality

Much of the discussion on the Location of Risk triggering a country’s entitlement to levy insurance premium tax (IPT) and parafiscal charges focuses on the rules for different types of insurance. European Union (EU) Directive 2009/138/EC (Solvency II) set out these rules. However, a related topic of growing importance in this area concerns territoriality, i.e. […]

Asia Pacific E-Invoicing Compliance
May 23, 2023
Japan: New e-Invoice Retention Requirements

Japan’s new e-invoice retention requirements are part of the country’s latest Electronic Record Retention Law (ERRL) reform. Along with measures such as the Qualified Invoice System (QIS) and the possibility to issue and send invoices electronically via PEPPOL, Japan is implementing different indirect tax control measures, seeking to reduce tax evasion and promote digital transformation. […]