India Vat Rates

The standard VAT rate in India is 12.5%, with lower rates of 4% and 1%, except in some states where certain higher rates have been prescribed. A refund of input tax is available for exporters.

A dual GST is expected to replace the existing transaction taxes as from 1 April 2011.

All Indian states impose a "consumption-type destinationbased VAT", driven by the invoice tax credit method on the sale of almost all types of movable goods and specified intangible goods (barring a few exempt goods), the list of which varies from state to state.

VAT is a multi-point levy affording tax credit on purchases at each stage to be set off against tax payable on sales. Under VAT, the rates are uniform in all the VAT states at 0%, 1%, 4% and 12.5% except in a few states. However, liquor, petrol or diesel are taxable at the rate of minimum 20% and may vary from state to state while gold and bullion are taxable at the rate of 1%. It is proposed that CST, which has been reduced to 2% with effect from June 2008, will be gradually phased out in order to allow movement of goods freely from one state to another state. The Finance Minister in the Union Budget of 2006/07 proposed the introduction of a national level goods and services tax (GST) regime by 1 April 2010.GST however has not been implemented as on date and is expected to implemented by 1st April 2011.

VAT Registration – The turnover limit for compulsory registration for businesses is INR 500,000, although this may vary by state. State VAT laws also specify monetary amounts of sales and/or purchases required for registration.

Filing and payment – VAT returns must be filed and payments made either monthly or quarterly, based on the tax liability.