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62 India-EU: Creating Market Alliances Tax Structures Tax Structure: Progressive and Nominal Tax Regime encouraging corporate sector Applicable Taxes Direct Taxes ‣ Corporate Taxes ‣ Withholding Tax Indirect Taxes ‣ Sales Tax ‣ Excise Duty ‣ Custom Duty Corporates are subject to Direct and Indirect Taxes as the case may be. India has a well-developed tax structure, with the authority to levy taxes divided between the Central Government and the State Governments. The Central Government levies direct taxes such as personal income tax and corporate tax and indirect taxes such as customs duty, excise duty, central sales tax and service tax. The States are empowered to levy professional tax and state sales tax apart from various other local taxes like Entry Tax, Octroi, etc. Direct Taxes: ~90% of respondents feel that remittance of profits to the home country is not a Corporate Income Tax S. No. Domestic Company Foreign Company challenge 1 Regular Tax Indian Corporate Tax Structure: Domestic: ~32% Foreign: ~41.5% Where total Income is more than INR 10M (€ 0.2M) Where the total Income is equal to or less than INR 10M (€ 0.2M) 2 Minimum Alternate Tax 33.9% 42.2% 30.9% 41.2% Where total Income is more than INR 10M (€ 0.2M) Where the total income is equal to or less than INR 10M (€ 0.2M) 11.3% of the book profits 10.3% of book profits 10.6% of book profits 10.3% of book profits 3 Dividend Distribution Tax 16.9% N.A. 4 Fringe Benefit Tax 33.9% 31.7% India Business, Business Week www.ebtc.eu
Building Access for “Waste-Water Management” Companies 63 Withholding Tax Rates for payments made to Non-Residents are determined by the Finance Act passed by the Parliament for various years. The current rates are: Interest: 20% of Gross Amount Royalties: 20% Technical Services: 10% Any other Services: ‣ Individuals: 30% of net income ‣ Companies / Corporates: 40% of net income The above rates are general and in respect of the countries with which India does not have a Double Taxation Avoidance Agreement (DTAA). Indirect Taxation Sales Tax: Central Sales Tax (CST): CST is 2% on manufactured goods Value Added Tax (VAT): Where a sale takes place within a state, VAT would be levied. Such a tax would be governed by the relevant state tax legislation. This normally ranges from 4% to 12.5% Excise Duty: Excise duty on most commodities ranges between 0 to 12% Customs Duty: The peak rate of basic custom duty is 10%. However the aggregate custom duties, including additional duties and the educational cess, are 26.85%. Several products attract the basic customs duty of 7.5% which works out to an effective duty of 23.89%. Service Tax: Service tax is levied at 10.3% of the value of taxable services (including the education cess and the secondary and higher education cess) on a broad range of services. Service providers having aggregate value to taxable services up to ~€ 17K are kept outside purview of service tax, subject to certain conditions. Are Indian Custom & Excise duties percieved to be high as compared to EU average by EU Wastewater SMEs? Can't say 11, 22% Yes 20, 40% 50 India Business, Business Week No 19, 38% www.ebtc.eu
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