Dubai, UAE: For many decades, the UAE and India have had very good ties, especially in trade and commerce, and the ties between the two countries have only got better with similar laws and regulations implemented by both countries. While Value Added Tax (VAT) is a thing of past in India, the UAE recently introduced the new tax regime to drive economic development of the country.

India first introduced Central Excise (Central VAT) with the objective of levying duty on manufacturing activity. This also allowed manufacturers to obtain a reimbursement of the excise duties paid on goods. Initially confined to raw materials and components, the scope of VAT was subsequently extended to include capital goods. Over the years, thegovernment announced the introduction of a State VAT in 2005 to levy VAT on sale of goods. VAT rates in India differed in every state and were based on the type of goods sold. As VAT is a multi-stage tax which is levied at each stage of supply of goods which involves sale/purchase, any person earning an annual turnover of more than Rs.5 lacs (around 29,000 AED) by supplying goods was liable to register for VAT payment. VAT was levied both on local as well as inter-state supply of goods.

However, in the UAE VAT was introduced at a rate of 5 percent starting this year. While most items were subject to VAT, there were a few exceptions including healthcare and education. Additionally, only those businesses crossing the defined annual aggregate turnover threshold were liable to register under VAT. Only companies in the UAE that report annual turnover of over Dh375,000 or more were obliged to be registered under the UAE VAT system. Companies whose turnover is around Dh187,500 had the option to register for VAT during the first phase of the VAT implementation.

While both countries have their own parameters in implementing VAT, it is to be noted that VAT in UAE will not just boost the economic growth but also build on its reputation as a global trading hub linking the countries further and paving the way for increased prosperity in the years ahead.

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© Press Release 2018