Being implemented on July 1, 2017 the Goods and Services Tax (GST) bill is the biggest tax reform India has seen in over 20 years. This new bill will bring the multitude of central and state taxes under one umbrella and implement a single taxation system on both goods and services. It is levied on value-added goods and services and collected at point of sale and therefore, the end-consumer will bear only the GST charged by the last dealer in the supply chain.
While it has numerous advantages for the consumer in India, it will have major impact on the 16 million Non-Resident Indians (NRI) who continue to invest and transact monies to India, most of it putting him at an advantageous position. With the implementation of GST impacting positively on sectors like logistics, warehousing, automobiles, film production, DTH, multiplexes, cement etc., it will make India an attractive destination for investment into these sectors by the NRIs.
- A simpler tax regime is conducive to investments and welcoming to NRI investors; GST will bring down real estate project costs and consequently, boost investment into the property sector and encourage non-resident Indians to buy homes in the market;
- A single consolidated tax system like the GST will bring more clarity, and avoids double taxation;
- NRIs can avoid multiple taxations amounting to indirect taxes from both state and central systems;
- Being out of the country leaves the NRI with little control however, with the GST there is uniformity and a comprehensive plan giving him transparency about the taxation for each transaction;
- Since GST disincentivize tax evasion, the NRI ends up buying only from those who have already paid taxes on what they are supplying thereby reducing corruption;
- NRIs involved in export businesses have an advantage in that, GST is not applied to goods and services exported from India.
- By bringing the unorganized sectors under a common tax regime it reduces the price gap between organized and unorganized sectors;
- A big incentive to the NRI is bringing the myriad tax departments under one umbrella thereby, improving compliance and simplifying the NRI’s investment process;
While all indicators suggesting the benefits of GST bill are promising towards the NRI, and its successful implementation would give a strong signal to NRI investors about India’s strong ability to support businesses, there is also the downside of levying taxes on goods and services that target the NRI specifically.
- As GST is implemented sending money home would become costlier.
- The Indian Government will levy a 12.36% service tax on fee or commission paid by agents for facilitating remittances.
As many financial institutions are adjusting their service rates to the newly implemented norms of the GST bill, keep an eye out on CompareRemit to see the latest updates and services taxes, if applicable to your remittance to India.