Goods and service tax is taking India by the storm. GST will bring in “One nation one tax” to unite indirect taxes under one umbrella and facilitate Indian businesses to be globally competitive. The Indian GST case is structured for efficient tax collection, reduction in corruption, easy inter-state movement of goods etc.
France was the first country to implement GST to reduce tax- evasion. Since then, more than 140 countries have implemented GST with some countries having Dual-GST (e.g. Brazil, Canada etc.) model. India has chosen the Canadian model of dual GST.
How Indian GST model compares with GST in other countries
| Particulars | India (proposed) | Canada | UK |
|---|---|---|---|
| Name of GST in the country | Goods and Service tax | Federal Goods and Service Tax & Harmonized Sales Tax | Value Added Tax |
| Standard Rate | 0% (for food staples), 5%, 12%, 18% and 28%(+cess for luxury items) | GST 5% and HST varies from 0% to 15% | 20 % Reduced rates- 5 %, exempt, zero rated |
| Threshold exemption Limit | 20 lakhs (10 lakhs for NE states) | Canadian $ 30,000 (Approx Rs. 15.6 lakhs in INR) | £ 73,000 (Approx Rs. 61.32 lakhs) |
| Liability arises on | Accrual basis: Issue of invoice OR Receipt of payment -earlier | Accrual basis: The date of issue of invoice OR the date of receipt of payment- earlier. | Accrual Basis: Invoice OR Payment OR Supply -earliest Cash basis (T/O upto 1.35mn): Payment |
| Returns and payments | Monthly and 1 annual return | Monthly, quarterly or annually based on turnover | Usually quarterly. Small business option- annual |
| Reverse charge Mechanism | Apply on goods (new) as well as services (currently under Service tax) | Reverse charge applies to importation of services and intangible properties. | Applicable |
| Exempt services | Manufacture of exempted goods or Provision of exempted services (to be notified) | Real estate, Financial Services, Rent (Residence), Charities, Health, Education | Medical, Education, Finance, Insurance, Postal services |
| Particulars | India (proposed) | Singapore | Malaysia |
|---|---|---|---|
| Name of GST in the country | Goods and Service tax | Goods and Service Tax | Goods And Services Tax |
| Standard Rate | 0% (for food staples), 5%, 12%, 18% and 28%(+cess for luxury items) | 7% Reduced rates- Zero rated, exempt | 6% |
| Threshold exemption Limit | 20 lakhs (10 lakhs for NE states) | Singapore $ 1 million (Approx Rs. 4.8 crore) | MYR 500,000 (Approx Rs. 75 lakhs) |
| Liability arises on | Accrual basis: Issue of invoice OR Receipt of payment -earlier | Accrual Basis: Issue of invoice OR Receipt of payment OR Supply - earliest Cash basis:(T/O upto SGD$1mn): Payment | Accrual Basis: Delivery of goods OR Issue of invoice OR Receipt of payment |
| Returns and payments | Monthly and 1 annual return | Usually quarterly Business option- Monthly returns. | Large organsations- Monthly |
| Reverse charge Mechanism | Apply on goods (new) as well as services (currently under Service tax) | Reverse charge applies to supply of services | Reverse charge applies to imported services |
| Exempt services | Manufacture of exempted goods or Provision of exempted services (to be notified) | Real estate, Financial services, Residential rental | Basic food,Health Transportation, Residential property, Agricultural land |
**USA does not have GST as it ensures high autonomy for the states**
Thus we find GST model across the commonwealth countries are similar with some variations. Unlike India, other countries have a much higher threshold for GST applicability thus reducing the burden for small businesses. This will bring in challenges for our SMEs.
Earlier countries implemented GST and faced many problems post-implementation. Read here to find out more.
Are you worried about how GST will impact your business? Register with us at Clear Tax to keep yourself up to date on GST. We also have experts to help you to smoothly transit to GST.
An edited version of this article has been published in Business Insider.
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