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

GST has the second highest tax rate in the world, the World Bank has concluded after studying 115 countries.

New Delhi: 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.

( Source : deccan chronicle )
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