2. Indian GST is considered one of the toughest tax system
mainly due to the following reasons
MULTI-TIER
TAX
STRUCTURE
COMPLEX RULES and
REGULATIONS TO BE
FOLLOWED DURING
REGISTRATION AND FILING
RETURNS
ONE OF THE HIGHEST GST RATES
3. One of the HIGHEST GST
RATE….The highest GST rate in India being
28% , while applying only to a subset of
goods and services traded:
Highest in Asia
Second highest in the world after Chile
Among a sample of 115 countries which have a
GST(VAT) System and for which the data is
available.
4. Multi-tier Tax
Structure What makes Indian GST system even more
complex is the number of different GST rates
applicable on different categories of goods
and services.
India currently has 4 non-zero rates: 5,12,18
and 28 per cent.
Apart from this several items are taxed at 0%
while gold is taxed at 3%.
To make things worse, petroleum products,
power and real estate is kept outside if GST
ambit. Exemption list is too limited in other
5. According to World Bank’s
biannual India development
update report , most countries in
the world have a single rate of
gst:”49 countries use single rate
,28 use two rates and only five
countries(namely India ,
Pakistan , Ghana , Italy and
Luxembourg) use 4 rates.”
6. The government has repeatedly ruled out
a single GST rate giving the reason that the
items of common use cannot be taxed at the
same rate as the luxury items.
On this the world bank is of the following
opinion :”India is unique in terms of its size
and scale of implementation when
compared to the other countries that have
introduced GST ,thus difference in design is
expected.”
7. There also have been reports of an increased
administrative tax compliance burden on firms
and a locking-up of working capital due to slow
tax refund processing.
The World Bank said. “High compliance costs are
also arising because the prevalence of multiple
tax rates implies a need to classify inputs and
outputs based on the applicable tax rate. Along
with the need to apply the correct rate, firms are
required to match invoices between their outputs
and inputs to be eligible for full input tax credit,
which increases compliance costs further,” it added.
8. However, the World Bank said while international
experience suggests the benefits of the GST are
likely to outweigh its costs in the long run.
“Key to success is a policy design that
minimizes compliance burden, for example
by minimizing the number of different rates
and limiting exemptions, with simple laws
and procedures, an appropriately structured
and resourced administration, compliance
strategies based on a balanced mix of
education and assistance programs and
risk-based audit programs,” it said.
9. The Bank advocated for a nuanced
communications campaign to
convey the various aspects of the
new system of GST among
businesses, consumers and key
intermediaries, such as tax
practitioners, as well as among the
tax administration and the
political class.
10. CONCLUSI
ONThough Indian GST may be the toughest
GST yet it is can be expected to improve
the collection of tax as well as boost the
development of Indian economy by
removing the indirect tax barriers
between states and integrating the
country through a uniform tax rate.
