In 2005, Value Added Tax (VAT) was introduced to Mumbai. VAT is added at the register.
From Maharastra’s Department of Sales Tax website:
“There are only two main rates of VAT: (1) 4% for items consisting mainly of raw materials used in the manufacturing process, IT products and some goods of common consumption (2) 12.5% for all goods unless they are listed under the other rates Food. Grains including pulses, milk, vegetables and books are not subject to VAT.
In addition, there are two other rates for specific items: (1) 1% for gold, silver, other precious metals, precious and semi precious stones and their jewelery (2) 20% for liquor. The only exception to these rates is for the sale of motor spirits, which have special tax rates based on the existing Bombay Sales of Motor Spirit Taxation Act, 1958, subject to a floor rate of 20%.”
Mumbai is currently revising its tax system from basing tax rates on the rental value of the property to the capital value of the property, which is expected to raise taxes in southern Mumbai and lower taxes in the suburbs. Look for updated information on the Municipal Corporation of Greater Mumbai’s website at http://www.mcgm.gov.in.
(Property tax is not something which will directly impact expats in Mumbai, since foreigners cannot purchase real estate.)
Manufacturing of goods in India procures an excise tax on those items. Most products are taxed at 16% though certain products require an additional 8% tax. Excise tax is based either on the value or on the maximum retail price of the product.
Certain service providers levy a tax of 10% for their services. See http://www.servicetax.gov.in for more information.
There is a 10% luxury tax on some goods and services in Mumbai. Hotels for example charge a 10% luxury tax.
Tax on Corporate Income
Domestic corporations are taxed at 35% with a 2.5% surcharge. The basic tax rate for foreign corporations is 40% with a 2.5% surcharge. For more information see http://www.incometaxindia.gov.in.
Capital Gains Tax
The basic rate for long-term capital gains tax is 20%. The sale of equity shares or mutual funds unites are exempt. Short-term capital gains are taxed at the corporate income tax rates. For more information see http://www.incometaxindia.gov.in.
Securities Transaction Tax
These securities transaction tax rates are quoted fromthe Indian Embassy in Washington DC’s website:
- Delivery base transactions in equity shares or buyer and seller each units of an equity-oriented fund – 0.075%
- Sale of units of an equity-oriented fund to the seller mutual fund – 0.15%
- Non delivery base transactions in the above – 0.015%
- Derivatives (futures and options) seller – 0.01%
If you are importing your belongings from home to Mumbai, be aware that you’ll have to pay a customs duty on some electrical items, new and used. Alcohol faces a very high tax. Customs duties change quickly, but your moving and relocation company can provide you with the latest rates, rules, and regulations regarding customs duties. For custom duty laws and information please see:
- Schedule of Customs duties- The Customs Tariff Act 1975 http://www.cbec.gov.in/customs/cst2012-13/cst-act-1213.pdf
- Website of Central Board of Excise and Customs http://www.cbec.gov.in/
- The Customs Act 1962 http://www.cbec.gov.in/customs/cs-act/cs-act-idx.htm
- Customs Manual http://www.cbec.gov.in/cs-manual-2012.pdf
- Baggage Rules 1998 http://www.cbec.gov.in/customs/cs-act/formatted-htmls/bgge-rules1998-ason-apl2012.htm
- FAQ http://www.cbec.gov.in/faq.htm
- Information on sales tax and VAT in India http://www.salestaxindia.com/