Foreign collaboration and
investment are subject to direct and indirect taxation as
the case may be. Indirect taxes such as customs, excise and
sales tax do not affect the income stream of the investment
in as much as these levies are shifted to the ultimate consumer.
However, the impact of Income-tax, which is a personal nature
and which cannot be shifted to the ultimate consumer, is a
crucial area which determines the investment strategy of the
investor.
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.
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