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India's GST is second highest tax rate in world: World Bank

India's GST is second highest tax rate in world: World Bank

According to a World Bank report, Goods and Services Tax (GST) in India is one of the most complex with the second highest tax rate in the world among a sample of 115 countries. World Bank in its bi-annual India Development Update released on 14 March described the present GST in India, however, predicted that benefits of GST are likely to outweigh its costs in the long run.

Major Findings of the Report:

  • 49 countries of the world has a single slab of GST.
  • 28 countries have two slabs.
  • Only 5 countries including India has 4 slabs. Other four countries are Pakistan, Italy, Luxemburg and Ghana.
  • The World Bank suggested that minimizing compliance burden and structuring different slabs into one unified slab can be a game changer.
  • The report also said that lack of clarity on discontinuation of local taxes, for example, in Tamil Nadu where the state government devolved an entertainment tax to local governments in order to impose it over and above a 28% GST. To preserve revenue collections, Maharashtra has also increased motor vehicles tax to compensate for losses due to GST.

GST in India

  • India’s GST structure has five tax slabs of 0, 5%, 12%, 18%, and 28%.
  • There are several exempted sales and exports are zero rated, which allows exporters to claim refund for taxes paid on inputs. Gold is taxed at 3% rate and precious stones at 0.25%. ,
  • Alcohol, petroleum products, stamp duties on real estate and electricity duties are excluded from the GST and continue to be taxed by the state governments at state-specific rates.

 

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