India with its consistent average growth rate of 8.8 percent and abundant highly skilled manpower provides enormous opportunities for investments. India is the largest democracy and tenth largest economy in the world. India is the fourth largest economy in the world in terms of purchasing power parity.

India has a federal system of Government with clear demarcation of powers between the Central Government, 28 State Governments and 7 Union Territories administered by the Central Government. The Central Government is empowered to legislate on matters enumerated in List I of Schedule 7 ("Union List") of the Constitution whereas the State Governments are empowered to legislate on matters enumerated in List II of Schedule 7 ("State List") of the Constitution.

India has a well-developed tax structure with clearly demarcated authority between Central Government (item No. 82 to 92C of the Union List) and State Governments and local bodies (item No 45 to 63 of the State List). Central Government levies taxes on income (except tax on agricultural income, which the State Governments can levy), customs duties, central excise and service tax. Value Added Tax (VAT), stamp duty, State Excise, land revenue and tax on professions are levied by the State Governments. Local bodies are empowered to levy tax on properties, octroi and for utilities like water supply, drainage etc.

In last 10-15 years, Indian taxation system has undergone tremendous reforms. The tax rates have been rationalized and tax laws have been simplified resulting in better compliance, ease of tax payment and better enforcement. The process of rationalization of tax administration is ongoing in India.

It is proposed to launch GST (goods and services tax) by 2010. Proposed GST will, inter alia, subsume central excise and service tax levied by the Central Government and VAT levied by the State Governments.

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