New Delhi: A report of World Bank has said that ‘goods and services tax (GST)’ implemented by Indian government last year is one of the most complex among other similar indirect tax systems, and is the second highest tax rate in the world, out of a sample of 115 countries.
In India’s GST system, there are five tax slabs of 0, 5%, 12%, 18%, and 28%. Whereas in as many as 49 countries, a single slab of GST is used. 28 countries have been found to use two slabs, and only five countries, including India, use four non-zero slabs. The countries that use four or more slabs of GST include Italy, Luxembourg, Pakistan and Ghana, quoted Hindustan Times.
The bi-annual India Development Update released on Wednesday by the World Bank stated that the GST implementation has been accompanied by state administrations experiencing disturbances in the starting days of the new tax regime. “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,” the World Bank report added.
Furthermore, World Bank report says that it can take time for the economy to get adjusted with a new tax system, however, it is possible that there will be numerous benefits in the long run. “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.