India’s GST is the world’s most complex tax, says World Bank


New Delhi, Mar 16 (DC): The Goods and Services Tax is one of the most complex taxes in the world with the second highest tax rate, the World Bank has said.

The GST was implemented by the Union Government on July 1 last year. GST has the second highest tax rate in the world, the World Bank has concluded after studying 115 countries that have similar indirect tax regimes.

The Goods and Services Tax was launched by Prime Minister Narendra Modi’s government with five tax slabs that are 0 per cent, 5 per cent, 12 per cent, 18 per cent, and 28 per cent.

Currently, around 49 countries have a single slab tax structure, while 28 countries use two slabs and there are only five countries, including India, which use five or more slabs. The other countries are Italy, Luxembourg, Pakistan and Ghana.

The World Bank's biannual publication, ‘India Development Update: India's Growth Story’ expects the economy to clock a growth rate of 6.7 per cent in the current fiscal.

“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.

The World Bank report further says accelerating the growth rate would also require continued integration into the global economy.

“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.

"The Indian economy is likely to recover from the impact of demonetisation and the GST, and growth should revert slowly to a level consistent with its proximate factors -- that is, to about 7.5 per cent a year," the report said.

  

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Comment on this article

  • Declan, Mumbai

    Sat, Mar 17 2018

    Rightly said by RaGa - GST = Gabbar Singh Tax !

    DisAgree Agree [1] Reply Report Abuse

  • Moshu, Mangaluru

    Fri, Mar 16 2018

    Geedad ki jab mout aayi to woh shahar ki taraf bhagtha. Similarly the beginning of GST is the end of BJP. Chidambaram and MMS already predicted the consequences of GST from the day one. World bank bit slow to judge. Hatsoff to both of uou sir.

    DisAgree Agree [17] Reply Report Abuse

  • sri_elder, Karkala

    Fri, Mar 16 2018

    Wait for some more time... World bank will recommend Indian gst for other countries in future... Wait wait....

    DisAgree [30] Agree [1] Reply Report Abuse

  • Amith, USA

    Fri, Mar 16 2018

    World Bank will NEVER, EVER & NEVER recommend this type of "GABBER SINGH TAX" for the next 5 centuries!!!!! Gober filled Bakhts only accept such BLUNDER because most of you are UN-PAD , MA PASS BA FAILED, PAKODA MASTERS!!!!

    DisAgree Agree [3] Reply Report Abuse

  • krishna, mlore/dxb

    Fri, Mar 16 2018

    Jalebi ki tarah seedha GST...

    DisAgree [2] Agree [9] Reply Report Abuse

  • SMR, Karkala

    Fri, Mar 16 2018

    sri_elder, Karkala
    Sir, Why PM Modi government has excluded petroleum, real estate and liquor from the ambit of GST?
    Why the entire South East Asian countries have reduced the fuel price for their own citizens, why PM Modi's India is increasing the fuel prices above UPA II?
    Lastly, Where was all that money which collected as surplus due to increased price has gone?
    We need answer from honest citizen of India. Can you elaborate it?
    Jai Hind

    DisAgree [1] Agree [15] Reply Report Abuse

  • SMR, Karkala

    Fri, Mar 16 2018

    This report has come blow to BJP after World Bank praises Narendra Modi government, projects 7.3 percent growth for India in 2018.
    If lawyer with 'Zero experience' is elected as 'finance minister' everything will be complex.
    For example PM Modi government 'Sanitary napkin' is luxury product kept in the ambit of 12% GST when the women of India suffers from hygiene. But bindi, kumkum all being excluded in the GST. Even rag pickers feel the pain due to GST on recycle materials.
    Though the government is being adamant that there is no data on the impact of demonetisation and GST on the jobs front in India, Labour Bureau data indicates otherwise.
    According to Labour Bureau data provided by the ministry in response to questions in the Lok Sabha, employment generation under the Prime Minister’s Employment Generation Programme fell sharply in 2017-18 in comparison to the previous year. While in 2016-17, 407,840 persons got jobs under the scheme, in the first three quarters of 2017-18, only about half as many, or 208,576, were covered by PMEGP.

    Likewise, the person-days generated under Mahatma Gandhi National Rural Employment Guarantee Scheme also showed a comparative slide in the first three quarters of 2017-18 in comparison to the 23,583 lakh person-days generated in 2016-16. The figure for April to December 11, 2017 was just 16,029.
    look at sector-wise data during 2016-17 and 2017-18 also reveals that the manufacturing sector saw a sharp loss in jobs following demonetisation. From registering an increase of 83,000 in the October-December 2016 quarter and a subsequent 1.02 lakh in the January-March 2017 quarter, the sector witnessed a sharp decline and nearly 87,000 job loss in the first quarter of 2017-18 as the effect of demonetisation began impacting the manufacturing sector due to a crunch in liquidity leading to closure of several units. This period also witnessed a fall of nearly 3,000 in the transport sector.
    India's GST has certainly killed the poor.
    Jai Hi

    DisAgree [1] Agree [20] Reply Report Abuse

  • Dr Mohan Prabhu, LL.D, QC, Mangalore (Kankanady)/Ottawa, Canada

    Sat, Mar 17 2018

    GST is a headache for all, and the five different tax slabs are likely to promote evasion; the only catch for the evaders is that their input tax credit will be based on the output. However, one thing has not been clarified by the World Bank. Most countries have an Excise tax structure for products such as alcohol, cigarettes and tobacco products, petroleum and petrol products, etc., and the rates for these are in most cases much higher than the GST on regular consumer products; furthermore, the rates are compounded. When gas prices go up, even the Canadian Post office charges extra on mail and parcels to compensate for the increase over and above the regular postage rates on which GST is payable.

    GST is not as simple as most people think. Besides, in Canada provinces which have not joined the harmonized sales tax regime (HST) charge their own GST and this has to be collected by the vendors alongside the HST. Though there is a single tax rate (food and food products, other than prepared foods like McDonald's hamburgers) are exempt), but the general rate can vary from 13% to 15% depending on what rate provinces set for provincial share of HST.

    Remember in a federal or centralized system of government, both levels of government have jurisdiction to set the rates and there can be as many different rates as there are provinces/states. The new Indian GST system is a cooperative federalism where all states agree to a single regime and eliminate not only their GST but also a host of other taxes and levies most of which are subsumed.

    May be the sales tax structure should remain but the number of slabs should be reduced to not more than three (excluding 0 rated items) - 0 rate for food, a 5% rate for mass products such as clothing and footwear, and two rates for luxury and super luxury items. What should go in each of those slabs is decided by the GST Council composed of both the Centre and States.
    Wish commentators had some idea of GST before blurting.

    DisAgree [1] Agree Reply Report Abuse

  • HENRY MISQUITH, Bahrain

    Fri, Mar 16 2018

    It will always be complex as it was brought by a chaiwala and other jhumla party leaders....

    DisAgree Agree [28] Reply Report Abuse

  • Chetan, Udupi

    Fri, Mar 16 2018

    Idiots fooled the gullible masses, saying it's the simplest.....

    DisAgree Agree [23] Reply Report Abuse

  • Santan Mascarenhas, Kinnigoli/Mumbai

    Fri, Mar 16 2018

    Compare our CA exam with England or CPA of USA. Compare our CS (Company Secretary) exam with outside India. These two exams are one of the toughest in the world. Because, company law, income tax law and all laws pertaining to finance are made very exhaustive in accordance with India's requirement. India has always been high on corruption. "The system" is only the outcome of a large dishonest people.

    DisAgree Agree [40] Reply Report Abuse

  • rion, udupi

    Fri, Mar 16 2018

    People selfish than rest of the world. Everyone looking into their own pocket, makes corruption free India impossible.

    DisAgree [1] Agree [16] Reply Report Abuse

  • R.Bhandarkar, Mangaluru

    Fri, Mar 16 2018

    Finance Ministry is also a complex organisation from inception...

    It sees only the 'Common Man' as target and fixes him...

    DisAgree [2] Agree [45] Reply Report Abuse

  • Jossey Saldanha, Mumbai

    Fri, Mar 16 2018

    Because it has been implemented by non finance professionals ...

    DisAgree [4] Agree [61] Reply Report Abuse

  • sri_elder, Karkala

    Fri, Mar 16 2018

    Two famous financial professional mms and rajan did not even guess and fix PNB rat hole...

    DisAgree [46] Agree [9] Reply Report Abuse

  • Jenifer, Mangalore

    Fri, Mar 16 2018

    As if your specialists dug the scam up, caught Nirav Modi by the collar and pushed him into a cell in Tihar !

    DisAgree [1] Agree [44] Reply Report Abuse

  • sri_elder, Karkala

    Fri, Mar 16 2018

    Our people have completed banned LOC (letter of credit) ..
    Congress started this OC facility for its loyalists

    DisAgree [27] Agree [2] Report Abuse

  • Jenifer, Mangalore

    Fri, Mar 16 2018

    Sri,

    You came to power in 2014, when Congress role ended (though the start of PNB matter started during Congress rule). You were informed in writing about misappropriation of matters in 2016. Why did you wait till Jan 2018 when Nirav fled ? If he had not fled, don't you think the loot would have still continued like a cat sipping milk with eyes shut ?

    Do you still want to convince the citizens of your "Our people have completed banned LOC (letter of credit) .." ???

    DisAgree Agree [20] Report Abuse

  • Truth teller, Karnataka

    Fri, Mar 16 2018

    Sri_elder, the central government awarded the CVC prize for best security practices by PNB!!! So when did the scam start!?

    DisAgree Agree Reply Report Abuse

  • sri_elder, Karkala

    Fri, Mar 16 2018

    Indian people so far did not feel gst tax burden...
    Why world bank is worried?

    DisAgree [64] Agree [5] Reply Report Abuse

  • Ahmed, Bangalore

    Fri, Mar 16 2018

    Not just GST, everything has turned complex after 2014 here in India, which poor world Bank isn't aware.

    DisAgree [5] Agree [49] Reply Report Abuse

  • Jenifer, Mangalore

    Fri, Mar 16 2018

    "The Indian economy is likely to recover from the impact of demonetisation and the GST, and growth should revert slowly to a level consistent with its proximate factors -- that is, to about 7.5 per cent a year," the report said.

    Meaning, even the WB is aware the Indian economy declined after demonetization and GST. Well, with 'pakoda' business idea to graduates by the PM (of-course the proximate factor), I am sure and should the WB be, that the revert to a consistent level is certain.

    DisAgree [5] Agree [51] Reply Report Abuse


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