How India’s GST in its current avatar deviates from global practices

A hundred-and-forty countries are already familiar with the goods and services tax (GST) or value-added tax. But in its current form, India’s GST is complicated and very different from the global variety. A multi-tier tax rate structure and complex rules make execution of this mammoth indirect tax a herculean task.

Unlike other nations, goods and services in India will be charged at different rates depending on the categories they belong to. Tax rates for 1,211 items have been finalized, though rates on six crucial and controversial items including gold and beedi are yet to be decided.

For services like hotels, restaurants and transportation, tax rates have been fixed based on room tariff, turnover of business, etc. This, say tax experts, is not in line with the international practice, where a uniform rate is applicable on a service irrespective of the value or status of the business.

As the accompanying chart shows, barring Canada, the threshold for GST applicability in other countries is higher than in India. A higher threshold was desirable as it would have reduced the tax burden on small businesses

SMEs who undertake interstate transactions, will have to register, irrespective of this threshold. Those within interstate transactions can opt for composition levy, where the threshold is Rs50 lakh, this will be useful to mostly those who do business-to-consumer transactions

The exemptions list too is limited in other nations, say tax experts. In India’s case, most services-related exemptions have been retained for now. The fate of item-wise and area-wise exemptions is yet to be known