The GST regime in India was implemented by the BJP-led NDA government in July 2017. (Photo: Reuters)

Since its introduction on July 1, 2017, the Goods and Services Tax (GST) regime has garnered a mixed response in the country even as the tax model continues to undergo a sea-change.

Finance Minister Arun Jaitley on Monday (December 24) said in a Facebook post that the government was committed towards removing 28 per cent, 18 per cent and 12 per cent tax slab, leaving behind 0 per cent and 5 per cent in addition to a standard rate, which will apply to luxury and sin goods. However, he mentioned that the process would take a long time to complete.

In the current structure of GST, there are over 28 items (broadly categorised) under the 28 per cent tax bracket, including cement and automobile parts two key sectoral pillars. In contrast, there are many countries where a single tax rate of 7 per cent is applicable on supply of goods and services.

There are already 160 countries where GST is in operation. In Asia, at least 19 countries have an operational GST while Europe has as many as 53 countries where GST is levied. In Africa, too, there are 44 countries where GST regime is followed.

India

India’s 28 per cent GST rate is the highest among all other countries. The GST Council, the governing body of the regime, is currently focusing on strategies to refine existing tax structure. India, like most other countries, follows the dual structure allowing both the Centre and the state to divide tax from sale of a product or good.

Read: Arun Jaitley: India should have GST slabs of zero, 5% and a standard rate

As of now, India has five tax slabs: 0 per cent, 5 per cent, 12 per cent, 18 per cent and 28 per cent.

CGST is collected by the central government while states claim SGST. Meanwhile, IGST is levied by the Centre for all inter-state supplies of goods and/or services. It will apply in case of both import and export.

Here are some prominent countries where GST regime is followed:

Canada

Canada’s GST model is what India is trying to achieve: A 5 per cent tax on supply of either goods or services. In comparison to India’s sin tax (currently at 28 per cent), a Harmonised Sales Tax (HST) is collected in Canada on certain products in addition to GST. Canada, like India, follows a dual-GST regime.

United Kingdom

Since 2011, United Kingdom’s uniform VAT levied on goods and services was increased to 20 per cent one of the reasons which makes London one of the most expensive cities in the world. In such a scenario, citizens are left with no choice but to pay a 20 per cent uniform tax rate on all products and services. In comparison, India’s multiple tax brackets have helped in better tax categorisation of products.

Also Read: GST cut in real estate: Buying flats can become cheaper after January. This is why

France

France’s VAT model consists of four rates, making it similar to the Indian GST tax structure. Since it became the first country to implement it in 1954, France has religiously stuck to four tax structures: 2.1 per cent, 5.5 per cent, 10 per cent and 20 per cent.

Having multiple tax structures offers more breathing space in terms of item categorisation. However, many economists complain that any tax rate above 18 per cent is arbitrary in nature.

Australia and New Zealand

Out of 160 countries that have implemented GST, many countries are still figuring out ways to streamline the tax structure, but not Australia and New Zealand.

While Australia, since introducing GST in 2000, has kept the rate unchanged at 10 per cent, New Zealand in 2010 increased it from 10 per cent to 15 per cent the first change since its implementation in 1986.

However, this single tax structure can lead to significant problems in case of drastic global change. However, single rate taxation would be difficult to implement in India due to several factors like wealth gap.

Singapore

In Singapore, GST was introduced in 1994 at a uniform rate of 3 per cent. However, it was raised by a percentile almost a decade later in 2003 and was increased to 5 per cent by 2004. It was again raised to 7 per cent in 2007. The country has had a shaky run with the GST as inflation trajectory spiked.

China

The standard rate of VAT in China is set at 17 per cent, which is considered ideal by many economists within the country and across borders. Eliminating its precursor, Business tax system, has helped the nation cope significantly with its real estate woes.

Fun fact

United States, the largest economy in the world, does not have a GST regime in place. Sales tax is still the main source of revenue for states. The US does not have any concept of VAT as yet.

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