India finally adopted the Goods and Services Tax in the July of ___. Aimed to establish a singular tax over the entire nation, the GST unites the myriad pre-existing taxes under one umbrella. But India is not the first country to introduce a tax aimed at increasing tax collection efficiency, reducing corruption, tax evasion, and making movement of goods easier. More than 140 countries have implemented the GST, with France winning the race by doing so in 1954.
It is important for the people and especially business people to understand how the GST and it’s rules varies from country to country. Not only this, it is even more important as the specifications and functioning of GST Software varies too.
India has adopted the dual-GST model which can be seen in countries like Canada and Brazil. This has been done as India is a federal country where both the Centre and the States have powers to levy and collect taxes. Both the levels of government have responsibilities as assigned by the Constitution for which they need to raise resources. A dual GST, thus, justifies the Constitutional requirement of fiscal federalism.
It’s still not a uniform tax as there are five tax slabs – 0%, 5%, 12%, 18%, and 28%. It technically is not a single tax. The distinctive factor in the Indian GST is the 18% slab, which is higher than any other emerging market economies.
GST around the world
New Zealand adopted GST way back in 1986, where the tax for everything has been a singular slab. The slab stood at 10% until 2010, after which it was bumped up to 15%. The GST does not apply to residential rents and financial services. Businesses here can recover the GST as an input cost. Due to the fact that GST was adopted such a long time ago, the GST Software in New Zealand is much simpler and direct.
Singapore has a universal rate system on every purchase. Initiated in 1994 with a flat rate of 3%, it was not until 2007 that the rate was increased to 7%.
The Indonesian model is slightly complicated with imports being subjected to both VAT and GST, but most exports are exempted from the list. If the services are supplied out of the country by foreign taxpayers, the tax rate is 10%, and certain items are taxed at 20% with the maximum cap being 35%. Imports subjected to the luxury tax are marked between 10% and 50%. Most items like gold, mining products, arts and entertainment, education and medical health are not subject to pay any VAT. This broad range of tax slabs makes the pharmaceutical management softwares even more complex.
There are three tax rates existing in the model: 0%, 5%, and 19%. China has maintained the GST applications over goods and the provision of repairs, processing, and replacement assisted services. This means that is partially collected on goods which are consumed in the manufacturing process as the fixed asset goods.
The Canadian GST closely resembles the Indian GST with taxation regimes under three schemes: Federal GST, Joint Federal, and separate Federal. Federal tax is the predominant system while joint federal runs on the synchronisation between the economy and the states. Separate federal only applies to Quebec as it is deemed a quasi-independent province. The tax rate is 5%, except for some provinces where a sales tax of 15% exists.
The USA collects taxes at separate levels ie the federal, state, and local governments. The federal tax rates are marked between 10% and 39.6% of the taxable income, while state and local governments mark the tax from 0% to 13.30% of taxable income.
The standard tax rate is 20% and the VAT is added to the cost of goods and service prices. Some supplies are subject to lower rates like 0% and 7%. Generally, pharmaceuticals, medicines, and medicinal equipments incur the 7% slab while the export of goods and services are marked at 0%. These slabs are needed to be weighed in while creating or procuring a pharmaceutical management softwares.
GST was born in France with 4 tax rate slabs. The rates here are chargeable in the slab of 2.1%, 5.5%, 10%, and 20%. Most of the goods are marked at the standard 20%.
This was our take on how the taxation system varies from country-to-country around the world. You think we miss something that the readers must be told about? Feel free to let us know in the comment box or contacts us.