VAT in India

Updated on Friday 25th June 2021

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The value added tax (VAT) is a type of tax that is charged to all goods and services traded on the Indian market. In July 2017, India introduced a new legislation, through which the local authorities modified the manner in which natural persons and legal entities are imposed with this tax. In that month, the VAT in India was changed into the Goods and Services Tax (GST), a similar tax applicable to the supply of goods and services, which introduced a more efficient system.
 
Investors who want to register a company in India will be liable to GST and they will need to register with the local tax authorities. One of the main benefits of the GST legislation refers to the fact that it replaced several indirect taxes on the supply of goods and services, thus reducing the overall manufacturing and sale costs. Our team of specialists in company formation in India can offer assistance on the taxation of legal entities, including on the Indian GST
 

Main purposes of the Indian GST legislation 
 

The newly introduced legislation on the taxation of goods and services simplified the manner in which this tax is collected by the local authorities and our team of consultants in company registration in India can offer more information. It replaced approximately 20 taxes, including several duties. The main purposes of the GST legislation are presented below:
 
  • simplify the tax compliance applicable to companies operating in India;
  • reduce the level of double taxation in the case of indirect taxes;
  • increase the activities of the manufacturing sector in India
  • reduce the cascade effect on the taxes applied to goods or services sold in India.
     

GST rates in India  
 

GST in India is slightly different than the VAT, in the sense that in this country VAT was available only for sale of goods. However, GST is imposed to both goods and services and it benefits from a uniform pricing system. Our team of consultants in company registration in India can offer legal advice on the legislation in the field. 
 
Investors interested in starting a company in India must know that both services and goods benefit from the same categories of VAT ratesIndia provides a higher VAT rate, charged for specific categories of goods and services, two types of standard VAT, and several reduced VAT rates. Under the new law, the tax is imposed at the following rates: 
 
  • 28% - it represents a higher VAT rate charged for goods such as automobiles, air conditioning, chocolate, accommodation (where the cost of a room per night is above RS 7,500) and other consumer goods;
  • 18% - the standard VAT rate in India, charged for goods and products such as: telephone services, banking, restaurants, cultural events, entertainment events, accommodation (where the cost per night is of RS 2,500 to RS 7,499) and others;
  • 12% - the other standard VAT rate, applicable to goods and services such as: accommodation with a cost of RS 1,000 to RS 2,499, business air travel, restaurants which do not offer air conditioning systems and others;
  • 5% - the reduced VAT rate is applicable to advertising services, tea, sugar, coffee, medical products;
  • 0% - applied to basic food products (cereals, milk, salt), vegetables and fish, accommodation with a price below RS 999 per night, books, newspapers and other similar goods. 

If you need information on Indian GST rates in 2021, our specialists can offer it to you. We also invite you to watch the infographic below:
 
VAT Registration in India


What are the basic documents for VAT registration in India in 2021?
 

Businessmen who want to open a company in India should verify the conditions that must be met when registering for VAT. During this procedure, it is legally required to provide a set of personal and company documents. As a business operating in this country, the following documents are necessary: 
 
  • the certificate of incorporation of the company that is applying for a VAT number in India;
  • the company’s statutory documents (the articles of association and the memorandum, in the case of corporate entities);
  • personal details of the owners of the company and its directors;
  • the lease agreement where the company has set up its business address;
  • information regarding the company (telephone number, trading name, the e-mail address, the type of activities carried out by the company). 
     
Besides these, during the registration, the company’s representatives have to provide information on the company’s corporate bank account, the list of directors, details on the person who is authorized to act on behalf of the company and other relevant information. For a complete list of any other documents that can be required, you can address our team of specialists in company formation in India

The procedure of obtaining a VAT number in India in 2021 is not complicated and is part of the company registration process where business owners want to avoid complications or additional procedures later.

Foreign companies must also register for VAT in India in 2021 if they supply VAT-payable goods or services and those who need assistance can rely on our company formation specialists.

Any questions you might have on Indian VAT registration in 2021, please send them to our consultants. You can also watch our video below:

 
 

What are the basic steps involved in registering for VAT in India in 2021? 
 

The procedure for registering for VAT purposes is comprised of several steps. The procedure itself is not very complicated but involves a wide range of documents and this is why we highly recommend you to address to local specialists, who have expertise in this field. Besides the above-mentioned documents, the applicants must also complete specific forms requested by the local tax authorities.
 
The procedure for VAT registration number in India in 2021 can be done using the online platform of the local tax institutions and, besides the forms that have to be correctly completed, the company’s representatives should also inform of the company’s PAN number. The Permanent Account Number (PAN) is issued by the Indian Income Tax Department to any person that falls under the supervision of this institution. 
 
The PAN number must be used on all the income returns required by the Income Tax Department and it is also necessary when applying for VAT registration in India. The PAN number is allocated to local businesses at the beginning of the procedure for company formation in India. Please note that the issuance of a VAT number in India can be concluded online, but also at the local tax offices in the region where the business is incorporated. As a general rule, the following steps have to be performed: 
 
  • address to the tax office operating in the city/region where the company is located;
  • request the necessary forms that must be submitted along with the company’s documents;
  • once these steps are concluded, the local authorities have the right to perform a verification of the company’s premises;
  • pay the required fees, which vary based on the estimated turnover of the company;
  • obtain the VAT registration certificate, which will state the VAT number in India
     
Please note that the procedure must be concluded by most of the entities that offer goods or services on the local market. Thus, the VAT registration in India should be also be done by associations, clubs, cooperatives, insurance companies, and banking institutions. More information regarding the tax procedures that must be followed by VAT payers throughout the financial year can be offered by our team of consultants in company registration in India.  
 
Certain categories of services are also exempt from taxation, as follows: education, healthcare and residential accommodation. Businessmen are invited to address to our team of consultants in company formation in India for consultancy services on the Indian taxes. Our representatives can offer more information on how to register for VAT purposes in this country.