It is now scheduled to be introduced in India on July 1, 2017: the Goods and Services Tax (GST). Even though there are only a few days left, many questions from politicians and administration about the new VAT system remain unanswered. This situation is unlikely to change much in the next two weeks, and many questions will probably only be finally clarified by the courts months or years later.

Regardless of the technical details of the future Indian GST tax, we would like to point out what we believe to be a very important side effect of this innovation: the introduction of the GST offers us European entrepreneurs a unique opportunity

  • ... to be just as “smart” as our Indian colleagues / consultants / partners / employees.
  • ... to use the time to take another look at the company's entire figures in detail.

So far: knowledge advantage and a “desired lack of transparency” in India’s favor

One of the major difficulties in the cooperation between German and Austrian parent companies and their Indian subsidiaries or European and Indian partners always resulted from the very different levels of knowledge about Indian tax legislation.

Our Indian colleagues were light years ahead of us (at least with their arguments). This enabled them to confront us - whether understandable or not - whether right or wrong - with statements about taxation that we could actually only accept without commenting further. The different acts, rules, guidelines, standards and comments were too complex Indian Institutes of Chartered Accountants and the Institutes of Company Secretaries of Indiato find your way through all this confusion. Unfortunately, it was therefore hardly possible to check the credibility of many statements.

Just a small example: How often have your dealers or even your subsidiary credibly claimed that a tax and customs burden of almost 30% would have to be borne when importing your products? Of course, corresponding calculations could be presented in which Basic Customs Duty, Special Additional Duty, Education Cess, Additional Duty, VAT, CST, Service Tax, Entry Tax, LBT, Excise Duty etc. were mentioned. And just as naturally, you were not told which of these burdens actually have to be absorbed as costs by the dealer/subsidiary. Perhaps these could have been passed on to the customer or they could even have been refunded/credited by the tax office. They never found out.

We know VAT systems and stick to the rules

Now, with the introduction of the GST, this knowledge discrepancy is changing: Because your Indian colleagues are currently just as smart or just as ignorant as you about what will happen to us with the GST.

We only have this level of knowledge today, but certainly not in a year. We claim that we Europeans are actually a little smarter than many Indian “experts” at the moment, as we have known the logic of a VAT system for decades. Accordingly, from this perspective, with common sense, we can judge the meaningfulness of what we are told better than someone for whom it is all completely new.

Last but not least, our approach will tend to be more tax honest and “conservative” than that of many Indian entrepreneurs who are now trying to seize the opportunity to abuse the “unclear transition phase” to avoid taxes.

Bring light into the darkness and the numbers on the table!

There is no better time than now - before the introduction of the GST tax - to examine the entire financial system of your Indian company in detail and also to ask all the “uncomfortable” questions that were not asked before. Because you want to be prepared for GST and you need to understand what impact GST will have on your business.

This opportunity is only available to you now! In just a year, when all aspects of GST have become clearer, this clarity will most likely turn into less transparency and less willingness to provide information from your Indian partners/colleagues/employees/dealers.

Don't let this unique opportunity pass you by!

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