Corporate Tax & GST

Corporate income tax: pick your regime

An Indian subsidiary is a domestic company, taxed on its worldwide income at domestic rates. A branch of a foreign company is taxed at the higher foreign-company rate — one of the main reasons we usually recommend a subsidiary. The current menu:

*Including surcharge and 4% health and education cess. Section numbers are from the Income-tax Act 1961; the Income-tax Act 2025 renumbers them from tax year 2026-27. MAT does not apply to companies electing the concessional regime.

GST after the 2025 reform

The GST 2.0 reform, effective 22 September 2025, replaced the old four-slab structure with a materially simpler one. For most businesses only two rates matter day to day:

• 5% — essentials and merit goods
• 18% — the standard rate for most goods and almost all services
• 40% — a de-merit rate on items such as tobacco, aerated and caffeinated drinks, large vehicles, and on gambling, betting and online gaming services
• 0% / 3% / 1.5% / 0.25% — niche rates for exempt items, precious metals, and diamonds (1.5% cut and polished, 0.25% rough)

GST is a value-added tax: you charge it on sales, credit the GST paid on purchases, and remit the difference through monthly or quarterly returns — though under the quarterly (QRMP) scheme, tax is still paid monthly. Exports are zero-rated, so export-oriented operations can claim refunds of input tax — a cash-flow process worth setting up correctly from day one. Where output is taxed at 5% and inputs at 18%, input credit accumulates and is recovered by refund claim — worth modelling in sectors such as textiles and renewables.

Withholding tax and treaty relief

Payments out of India — dividends, royalties, technical service fees, interest — attract withholding tax at 20% under domestic law for most payment types. India has Double Taxation Avoidance Agreements with 90+ countries, which usually reduce these rates and prevent the same profit being taxed twice. Your holding jurisdiction therefore matters: the same dividend can cost meaningfully different amounts depending on where the parent sits. We review treaty access as part of structuring, not as an afterthought.

Transfer pricing: unavoidable, manageable

Every transaction between your Indian entity and its foreign affiliates — management fees, royalties, intercompany sales, cost recharges — must be at arm's length and documented annually. This is a routine compliance for well-advised companies and a recurring dispute for careless ones. We set the intercompany model, benchmark it, and maintain the documentation so it stays routine.

Incentives worth checking

Depending on sector and location: production-linked incentive (PLI) schemes for manufacturers in the 14 notified sectors, GIFT City (IFSC) concessions for financial services and export businesses — extended to 31 March 2030 — state-level capital and employment subsidies, and R&D-linked deductions. The SEZ income-tax holiday closed to new units in March 2020; customs and operational SEZ benefits remain. Incentives shift with policy; we validate current eligibility rather than quoting last year's brochure.