Faroe Islands. Guernsey and Alderney. Island of Man. San Marino. Svalbard and Jan Mayen Islands. United Kingdom. Antigua and Barbuda. British Virgin Islands. Cayman Islands. Costa Rica. Dominican Republic. El Salvador. Falkland Islands Malvinas. French Guiana. Puerto Rico. Saint Eustatius. Saint Lucia. Saint Maarten. Saint Martin. Saint Vincent and the Grenadines. Trinidad and Tobago. Turks and Caicos Islands. Virgin Islands.
Burkina Faso. Cape Verde. Central African Republic. Democratic Republic of the Congo. Equatorial Guinea. Ivory Coast. Libyan Arab Jamahiriya. Saint Helena. Sao Tome and Principe. Saudi Arabia. Sierra Leone. South Africa. South Sudan. United Arab Emirates. United Republic of Tanzania. Western Sahara. New Hampshire. New Jersey. New Mexico. New York. North Carolina. North Dakota. Rhode Island. South Carolina.
South Dakota. Washington DC. West Virginia. Avalara License Management. Business Licensing and Registration. Managed Tariff Code Classification. Vendor Capture. Avalara License Management for Accountants. AvaTax Communications. Section 2 explores the concept of GST and its advantages. Section 3 draws out the key lessons from a cross-country perspective.
Section 4 sketches the evolution of GST— from ideas to legislation; the challenges and modalities of implementation. Concluding observations on the macroeconomic implications of the GST are set out in Section 6. A common base and common rates across goods and services and similar rates across states and between Centre and states will facilitate better tax administration, improve tax compliance, alleviate cascading or double taxation while also ensuring adequate tax collection from inter-state sales.
Credits of input taxes paid at each stage will be available in subsequent stages of value addition, which makes GST essentially a tax on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain with set-off benefits against all previous stages.
Singapore taxes virtually everything at a single rate, while many countries France, Italy, UK have multiple rates. In some countries e. In this regard, a robust federal structure of government is particularly helpful for ensuring success of such reforms — Brazil, India and Canada being prominent examples. Discussion on tax reform to simplify federal and state indirect taxes is underway in Brazil with a proposal to introduce a single integrated national VAT on both goods and services.
Furthermore, tax laws need to be simplified to avoid definitional issues and defray administrative costs.
Drawing on lessons in the implementation experience of countries, a well-designed GST should ensure that i a single rate is levied on a comprehensive base goods and services ; ii no exemptions are given beyond standard ones; iii GST refunds are processed expeditiously; iv an adequate threshold is delineated to exclude small and micro business; and v initial rates are suitably calibrated to avoid disruptions to economic activity and macroeconomic stability IMF, b.
These are i small businesses may not register; ii a trader may under-report actual sales; iii traders may reduce their liability by exaggerating the proportion in the lower tax slabs; iv tax authorities need to guard against traders who collected tax but were not remitted to the government; and v traders may make false claims for refunds IMF b.
Although the precise impact is difficult to measure accurately, average growth increased by about 0. As it promotes competitiveness, efficiency gains from GST is considered to be higher vis-a-vis other taxes, the benefits of which accrues to growth over the medium-term IMF, In the short term, however, it may result in lower growth as households adjust their consumption after GST implementation.
While an increasing VAT revenue-GDP ratio is not necessarily correlated with a rising government spending- GDP ratio, critics have argued that an indirect less visible VAT may support higher levels of government spending compared to the use of direct taxes eg.
In fact, inflation in Canada did not have any impact from the GST rate reductions of 7 to 6 per cent and again in to 5 per cent which may be attributed to Canadian provinces being able to impose their own sales tax Gelardi, Singapore witnessed a sharp rise in inflation soon after introduction of the GST, mirroring the experience of many other countries.
Australia, and New Zealand saw one-off increases in inflation post GST implementation which normalized within a year. In Australia, GST had a significant but transitory impact on inflation with a lag of one quarter after its implementation in July During the quarter, inflation showed an average increase of 2.
All subsequent rate increases in Germany have since been successfully effected during periods of economic slack Palil and Ibrahim, In the context of 17 Eurozone countries, VAT pass-through to inflation during to were found to be sensitive to the type of VAT change and significantly different between durables and non-durables due to differences in storability and other features such as the salience of tax changes.
For changes in the standard rate, the final pass through was about per cent, while for reduced rates it was significantly lower at around 30 per cent Benedek et al. De Mooij, M. Keen, and P. The GST was introduced in as part of a comprehensive tax and welfare reform when the economy was in crisis.
Initially, GST was introduced at a rate of 10 per cent which was subsequently raised to This eventually led to the adoption of GST at a single rate with almost no exemptions. Most notably, food was included in the GST base at the full rate, which broad-based the tax net and also reduced both compliance and administrative costs. GST was levied on supplies of goods or services purchased in Canada and included most products, except certain essentials such as groceries, residential rent, medical services, financial services and exports.
The system of input tax credit ensures that the value added at each stage of the supply chain is taxed only once thus avoiding cascading. The introduction of GST led to new processing operations and techniques to verify the accuracy of the returns submitted by small entrepreneurs and multinational corporations Sherman, Since some of the Canadian provinces impose their own sales tax besides the GST, it creates price distortions in the economy IMF, a.
The GST was introduced in April at 3 per cent, along with a reduction of direct and other indirect taxes Zhou, et al, to make it acceptable to the public and to minimize the inflation impact.
Additionally, the government committed not to raise the tax for the next 5 years which was an important step in reviving consumer spending. Thereafter, rates were raised gradually, although it remains one of the lowest rate globally with favourable implications for trade competitiveness Yin, Table III.
The motives for GST implementation were i broadening the indirect tax base; ii offsetting the loss in revenue as a result of the reduction in direct taxes; and iii making the tax base more resilient in the long term in view of an aging population Zhou, et al, To compensate for the regressive nature of GST, Singapore has introduced a GST compensation scheme which provides support to the needy and underprivileged.
Australia imposed a 10 per cent tax on goods and services and replaced a range of existing taxes — the wholesale sales tax WST , debit tax, financial institutions duty, and stamp duty on shares, leases, mortgages and cheques. The GST is collected by the federal government and redistributed to the six states and two territories according to the amount recommended by the Commonwealth Grants Commission CGC on the basis of the principle of horizontal fiscal equalization HFE.
However, it was introduced at state-level. CST applies on the sale of goods levied by the Central Government. It is collected and retained by the state where the tax is collected. Designed to be a single, comprehensive, destination-based taxation concept, Goods and Services Tax GST unifies the entire country in terms of how the tax is collected.
GST has revolutionized the Indian taxation system. So, his output tax was Rs. Then, if he purchased office supplies for Rs. He had to pay Rs. His total tax outflow is Rs. Now, subtract GST on office supplies Rs. Therefore, the net GST liability to pay is Rs.
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