Goods and Services Tax (GST) is an indirect tax levied on the supply of goods and services in a country. The introduction of GST in India in 2017 was a significant reform that aimed to simplify the taxation system and reduce the cascading effect of taxes. While India’s GST system is relatively new, many countries have already implemented similar tax regimes. In this article, we will discuss about the GST in India differ from the GST in other Countries.
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Overview of Goods and Service Tax (GST)
Goods and Services Tax (GST) is a value-added tax levied on the supply of goods and services. While many countries have implemented GST, the structure and implementation of GST can differ from country to country. The implementation of GST has also enabled the free movement of goods across the country and has eliminated the need for check-posts at state borders, resulting in a reduction of logistic costs and time. Additionally, the GST has also increased transparency in the tax system by providing real-time tracking of transactions through the GST Network (GSTN), a digital platform for filing tax returns, making payments, and accessing other tax-related services.
GST in India
India implemented GST on July 1, 2017, after years of discussions and negotiations between the Centre and the States. GST in India is a dual tax system, which means that it is levied by both the Centre and the State governments. There are four tax slabs under GST in India, i.e., 5%, 12%, 18%, and 28%. Some goods and services, such as petroleum products and alcohol, are exempted from GST in India.
The Goods and Services Tax (GST) was a significant reform in India’s indirect tax system, and it aimed to simplify the tax structure, reduce tax evasion and corruption, and make Indian businesses more competitive. The implementation of GST in India replaced multiple indirect taxes such as excise duty, service tax, VAT, and others, with a single tax.
It brought the “One Nation, One Tax” concept, which streamlined tax compliance and eliminated the need for multiple taxes, making it easier for businesses to operate across different states.
The Indian GST regime is structured to be a consumption-based tax, where the tax is levied on the final consumer of goods and services. This tax structure ensures that the burden of tax is shared equally among all stakeholders involved in the production and distribution of goods and services. Moreover, the GST regime has also simplified the compliance process by introducing a single registration system and a unified tax return filing mechanism.
The GST Council which consists of the finance ministers of all states and the central government is responsible for making recommendations on GST rates and other policy decisions.
Difference between GST in India vs GST in Other Countries
Several countries have implemented GST, but the structure and implementation of GST vary from country to country. Let’s compare GST in India with some other countries.
- Canada: Canada was the first country to implement GST in 1991. The Canadian GST is a federal tax and is levied at a rate of 5% on most goods and services. However, some provinces have their own sales tax, which is added to the federal GST. The Canadian GST is similar to the Indian GST in terms of structure, but the tax rate is lower.
- Australia: Australia implemented the GST in 2000, and it is levied at a rate of 10% on most goods and services. The Australian GST has exemptions on certain essential goods such as fresh food and medical supplies. The Australian GST is a single tax, which means that the federal government collects it and distributes it among the states.
- Singapore: Singapore implemented GST in 1994, and it is levied at a rate of 7%. The Singaporean GST has exemptions on certain essential goods such as healthcare services and financial services. The Singaporean GST is a single tax, which means that the government collects it and uses it for various purposes such as healthcare, education, and infrastructure.
- France: France implemented the GST in 1954, and it is known as Value Added Tax (VAT). The French VAT is a single tax and is levied at a standard rate of 20% on most goods and services. However, certain goods such as essential food items are taxed at a reduced rate of 5.5%. The French VAT has been successful in reducing the tax evasion rate and has contributed significantly to the country’s economy.
Here is a table outlining some of the key differences between GST in India and major countries:
| Country | Implementation of GST in Countries | Name of GST in Countries | GST Rate | Threshold | Dual GST | Exemptions | Returns |
| India | Implemented in 2017 | Goods & Service Tax | 5-28% | INR 40/20 LAKH | Yes | Yes | 3 |
| France | 1954 | VAT | 2.1% to 20% | €85,800 | No | Yes | – |
| Australia | Implemented in 2000 | Federal GST | 10% | AUD 75,000 | No | Yes | 4 |
| Canada | Introduced in 1991 | Federal GST | 5% | CAD 30,000 | Yes | Yes | 4 |
| New Zealand | In 1986 | GST | 15% | NZD 60,000 | No | Yes | 1 |
| Singapore | In 1994 | GST | 7% | SGD 1 Million | No | Yes | 4 |
| European Union | Value added tax (VAT) i.e. equivalent to GST | EUR 10,000- 85,000 | EUR 10,000-85,000 | No | Yes | Varies by Country | |
| China | 1984 | VAT | 13% | CNY 5 million | No | Yes | – |
What Separates the GST in India from the GST in Other Countries?
The GST in India differs from the GST in other countries in several ways. Here are some of the key differences:
- Dual GST Structure: India has a dual GST structure, which means that both the central and state governments have the power to levy GST. This is in contrast to many other countries, such as Australia, Canada, and Singapore, where there is a single GST system. In Canada, for example, the federal government is responsible for administering and collecting GST, while the provinces levy their own provincial sales taxes.
- Multiple GST Rates: India has a multi-tiered GST rate structure, with four rates of 5%, 12%, 18%, and 28%. In contrast, many other countries have a single GST rate or a few rates. For example, in Australia, the GST rate is a flat 10%, while in Singapore, it is 7%.
- Petroleum Products: In India, petroleum products such as petrol, diesel, and aviation turbine fuel are not included in the GST system, while in many other countries, they are. For example, in Australia, GST is levied on petrol and diesel.
- Threshold for GST Registration: In India, businesses with an annual turnover of up to INR 20 lakhs (INR 10 lakhs for special category states) are exempted from GST registration. This threshold is much lower than in many other countries. For example, in Canada, businesses with annual revenue of CAD 30,000 or less are exempted from GST registration, while in Australia, businesses with an annual turnover of less than AUD 75,000 are exempted.
- Input Tax Credit: The availability and utilization of Input Tax Credit (ITC) also differ in India compared to other countries. In India, businesses can claim ITC on GST paid on goods and services used for business purposes. However, the rules for claiming ITC are complex and restrictive, leading to compliance challenges for businesses. In contrast, other countries such as Canada have more liberal ITC rules.
- Compliance Burden: Compliance requirements for GST in India are considered to be more complex and burdensome compared to other countries. In India, businesses are required to file monthly or quarterly GST returns, depending on their turnover, and comply with various other compliance requirements.
Takeaway
These are some of the key differences between GST in India and other countries. It is important to note that GST laws and regulations can vary widely between countries, and businesses operating in multiple countries need to be aware of the specific GST requirements in each country they operate in. GST rates and exemptions can vary widely between countries and can be subject to change over time. It’s essential for businesses operating in different countries to stay up-to-date on the latest GST regulations and requirements in each country they operate in.
