The much-awaited Good and Service Tax (GST) has finally come into effect from July 1, 2017. Even as it is considered as one of India’s biggest tax reforms, more than 140 countries across the world have already implemented the concept of ‘one nation one tax’. The list includes Canada, UK, France, Russia, China, Mexico, South Africa, Australia, Japan, Thailand, Malaysia, among others. Countries like Brazil and Canada operate with a Dual-GST system and European countries follow a single tax system.
While the experiences of respective countries differ from each other, they have followed the mantra of ‘streamlining and simplifying taxation’ throughout.
Here is how Indian GST stacks up against other countries:
Canadian GST was put in place on January 1, 1991, by the then Prime Minister Brian Mulroney to replace the hidden 13.5 per cent manufacturers’ sales tax (MST). The GST was clocked at seven per cent as the first phase of implementation began. Later, Canada reduced it to six per cent on July 1, 2006. Now GST is levied at five per cent. In Canada, Provincial sales taxes (PST) gets levied by the states, and Goods and Services Tax (GST), a value-added tax is levied by the federal government. PST ranges from zero to 10 depending on the state. Goods and services relating to basic needs such as drugs, medical services, basic groceries, agriculture are taxed at zero per cent GST.
Like Canada, Brazil also follows Dual-GST system. The federal tax imposed by Centre vary not significantly — 17 per cent in Sao Paulo to 18 per cent in Rio de Janerio. The rate of inter-state supplies within Brazil vary between four per cent and 25 per cent.
China’s Value Added Tax (VAT) simplified many conflicting tax systems and is clocked at 17 per cent, besides other taxes.
Malaysia implemented GST in 2015. It fixed the rate at six per cent. After the implementation, consumer confidence dipped, inflation went up and anti-GST protests occurred across cities.
Australia announced GST implementation in 2000, fixing the rate at 10 per cent. The GST replaced the federal wholesale sales tax and state and territory taxes with a single tax rate of 10 per cent. Reportedly, it wants to revise it to 15 per cent.
In New Zealand, GST is fixed at 15 per cent and is applicable on most indigenous goods and services, most imported goods, and certain specified imported services.
Thailand keeps its GST at seven per cent besides its other taxes.
Russian GST is levied at 18 per cent.
India has chosen the Canadian model of dual GST and honours the federal structure. It categorised different goods and services under four tax slabs — 5 per cent, 12 per cent, 18 per cent and 28 per cent. The majority of items are taxed at 18 per cent.