Since the implementation of GST in India, there has been a constant debate about its simplicity v/s complexity especially when we compare it with the GST model in place in other parts of the world. India is the newest country to implement GST only as recently as July this year. However GST is already in force in more than 140 countries around the world with France being the pioneering nation starting way back in 1954. Though this article I have compared some important aspects of Indian GST law with other countries of the world.
Dual Structure
Let’s begin with the structure of GST. India has chosen the model of dual GST as it has a federal structure where the Centre and states have the powers to levy and collect taxes. The only other countries following dual structure are Canada and Brazil. The idea of implementing GST in India was based on the premise that there will be a single unified tax to promote harmonisation of tax rates, bases and administration. But the truth is just the opposite. Article 246A now confers power on Parliament and every state legislature to levy goods and service tax. Thus, we have one parliamentary law and about 28 state laws that levy GST. This was done as a compromise formula because some states resisted the move to subsume all taxes under one umbrella. If we look at countries like Germany, Australia, New Zealand there is a single unified GST law for the entire country as a consequence, taxpayers and business enterprises find it simple to follow and thereby display greater levels of transparency in implementing it.
Tax Rates
One of the scathing criticisms of GST in India are its high tax rates, which are considered to be one of highest in the world. More than 60% of the Goods and Services taxed under GST are in the range of 18 to 28%. Moreover some products have been levied an additional tax in the form of cess over and above the basic tax which further adds to the taxpayers woes. A closer look at the GST rates of some of the Asian countries such as Singapore (7%), Korea (10%), Japan (8%), and Malaysia (6%) shows the startling difference between the GST rates being imposed. It is similar case while comparing it other countries outside the sub-continent such as Australia (10%), South Africa (14%), Brazil (10%) etc. where again the comparative rates are lesser than that in India. One of the reasons for high tax evasion in our country is the prevalence of high tax rates. Which is why it becomes all the more important to rationalise the tax rates in such a way that the tax burden gets lessened on the general population yet at the same time the tax collection for the nation increases as more people start paying taxes on account of the rationalised rates.
Threshold exemption limit.
Threshold exemption limit is the turnover below which GST registration is not required. The threshold exemption limit in India for GST is Rs 20 lakh (Rs 10 lakh for North Eastern states.). Comparing the same with countries like Singapore and Malaysia where the same limit is Rs 4.8 crore and Rs 75 lakh respectively. We can see that since the threshold limit is significantly low in India which is why more small and mediums enterprises get affected by it as they come under the GST ambit, this creates a burden of compliance and also affects their competitive cost advantage adversely due to the tax effect.
Tax levied and collected by the government is eventually meant for the greater welfare of its population. It is an effective way of collecting money from those who have it and providing its benefits to those who need it. The problem with tax reforms is not the laws, but the implementation of the law. For effective implementation there needs to be simplicity which in turn will bring about more transparency in collection and distribution of taxes. GST in its present form is seen as complicated and hence the government will need to work overtime to simplify it, so that the benefits from this wonderful tax reform are seen not just by the nation but by the whole wide world.
