New Delhi: The World Bank, has called the Indian Goods and Services Tax (GST) as the most complex in the world and added that it not only has the highest tax rates but also the largest number of tax slabs.
It added that India has the highest standard GST rate in Asia, and second highest in the world after Chile.
“The tax rates in the Indian GST system are among the highest in the world. The highest GST rate in India, while only applying to a subset of goods and services traded, is 28 per cent, which is the second highest among a sample of 115 countries which have a GST (VAT) system and for which data is available,” the World Bank said in a report.
What makes the Indian GST system even more complex is the number of different GST rates applicable on different categories of goods and services.
India currently has four non-zero rates: 5, 12, 18 and 28 per cent. Apart from that, several items are taxed at zero per cent while gold is taxed at 3 per cent. To make things worse, petroleum products, power and real estate have been kept outside the GST ambit.
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According to the World Bank’s biannual India Development Update report, most countries in the world have a single rate of GST: “49 countries use a single rate, 28 use two rates and only five countries including India use four rates,” it said.
Apart from India, the countries that use four or more GST rates are Italy, Luxembourg, Pakistan and Ghana.
While the government has said it would bring down the number of rates once the new taxation system stabilises, it has repeatedly ruled out a single GST rate.
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“Luxury goods, sin products, and products hazardous to the environment and health can’t be taxed at the same rate as ‘common-man products’. Wheat, rice, sugar can’t be taxed at the same rate as a Mercedes car or a yacht or tobacco,” Finance Minister Arun Jaitley had said while ruling out the possibility of a single GST rate.
When reached for comment, a World Bank spokesperson said that India is unique in terms of its size and scale of implementation when compared to other counties that have introduced GST.
“The difference with other countries in design is therefore to be expected,” he said.
