State Government Taxes in India
Details of the taxes in India that are administered at state level…
This is levied by the state government on various forms of entertainment. Each state taxes different types of entertainment and at varying rates.
Throughout India, entertainment providers will often include this tax in their ticket price. The activities and places most likely to levy an entertainment tax are:
- Cinema halls/movie theatres
- Cable/satellite television stations
- Pubs, discos and lounges
- Ticketed exhibitions
- Ticketed performances (dance, music and theatre)
- Amusement parks
- Horseracing meetings and other ticketed sporting events
- Boat rides, cruises and watersports
- Internet cafés
To find out more about each state’s entertainment tax regulations: Click here
This is levied by most state governments on hotel rooms and hospitality services. It is usually added on to the base price of a room.
The rate is set according to the various price ranges of hotel rooms at or above the state’s minimum price for taxation. More expensive hotel rooms are charged a higher rate. The luxury tax rate also varies significantly between states.
For example, the luxury tax rates for hotels in Tamil Nadu are:
- Rs250 to Rs500 per day: 15 percent
- Rs500 to Rs1,000 per day: 20 percent
- Rs1,000 or more per day: 25 percent
In Maharashtra, the rates are:
- Up to Rs750 per day: 0 percent
- Rs750 to Rs1,200 per day: 4 percent
- Rs1,200 or more per day: 10 percent
The union territories of the Andaman and Nicobar Islands, Lakshadweep and Pondicherry do not levy a luxury tax.
- Further information about luxury tax regulations can be found on the website for each state’s department of sales or commercial taxes. For a full list: Click here
In India, road tax is a combination of several taxes imposed by the central and state governments on motor vehicles and road usage. Since the system of taxation for road transportation is complicated, only taxes directly related to purchasing and maintaining a motor vehicle will be discussed in this section.
The following taxes will be levied on the purchase of a new vehicle:
- CenVAT (central value added tax) – 10 percent
- VAT (value added tax) – the tax rate in the state of purchase
- Import duty – 10 percent or 61 percent (for imported cars, motorcycles or imported parts)
- Excise duty – 4 percent (for cars and motorcycles manufactured in India)
- CST (central sales tax) – 2 percent (a one-off tax on vehicles purchased outside the buyer’s state of residence)
The state government will impose the following taxes on vehicles in use:
- Motor vehicles tax – one-off, lifetime or annual tax (depending on the state) that is calculated using factors such as engine capacity, cost price, seating capacity, horsepower and/or weight
- Passengers and goods tax – tax on the transportation of goods and/or passengers by road
- State entry tax – tax on vehicles purchased in one state but transported into another
- Tolls – see Angloinfo’s guide to “Driving in India”
Further information about taxes on transportation and motor vehicles, along with the required forms, can be found on the Ministry of Road Transport & Highways’ website: Click here
This is levied by state governments on documents used in transactions such as contracts, mortgages, licences and commissions. More specifically, stamp duty is levied on documents that create, transfer, limit, extend, extinguish or record a right or liability.
Such documents become legal when they are stamped with either adhesive or embossed stamps, and after the duty is paid in full.
Although most policies are based on the central government’s Stamp Act of 1899, the stamp duty rate and which documents are taxable vary between states. It is the responsibility of the writer or bearer of the document to pay the stamp tax to the government officer or other official. These individuals will often include the stamp tax in their service fees.
Further information about stamp duty regulations and the required forms can be found on the website for each state’s registration department.
Value Added Tax
Value added tax (VAT) is a consumption tax included in the sale price of goods and services. While excise duty is levied only on goods manufactured in India, VAT is imposed on domestic and imported products. VAT has been recently implemented throughout India to replace the sales tax, but the actual tax rate and what is taxed varies between states. Only the territories of Andaman and Nicobar Islands and Lakshadweep have yet to implement VAT.
The standard rate of VAT is 12.5 percent, with the exception of five states:
- Andhra Pradesh (14.5 percent)
- Assam (13.5 percent)
- Chhattisgarh (14.0 percent)
- Jammu and Kashmir (13.5 percent)
- Karnataka (13.5 percent)
There are also reduced VAT rates of 1 percent and 4 percent for specific goods and services throughout India. For example, VAT of 1 percent is levied on gold, silver and other precious metals. For drugs and medicines, the rate is 4 percent.
Goods and services that are exempt from VAT include liquor, books, lottery tickets, diesel and petrol. However, these items may be subject to other taxes such as excise and customs duties.
Registered businesses file VAT returns monthly or quarterly, depending on the state.
- For further information about VAT regulations and the required forms: Click here