GST (Goods and Services Tax)

No wonder that even the industry biggies are mulling over the tragic effect that GST (Goods and Services Tax) will cause to the economy post its implementation. The question of the hour is we are ready to absorb this paradigm shift in the system or the economy will succumb to this transition.  While we are gearing up for what they are calling as the biggest innovation in collection of the indirect taxation of the country, let’s turn back to the time other major economies of the world adopted it and the effect of this transition on them:


Following the implementation of GST in April 2015, there were reports cash registers weren’t calibrated to deal with the new regime, government agencies weren’t ready and GST refunds were delayed. Key refresh from Malaysia learning is that businesses need to start early with the implementation process to be GST-ready. The Malaysian Government received strong resentment even after providing 1.5 years for GST preparedness. Given the complex GST model proposed in India and the need for a business to undergo a transformation to adapt to the GST regime, it would be quite challenging for the Indian government to tackle.


When Canada implemented its goods and services tax in 1991, retailers offered customers “Don’t Blame Me for the GST” stickers amid cash-register snafus and vending-machine meltdowns. But today GST is now one of the major sources of revenues for the Canadian government


Three years after pledging in 1995 to “never” introduce a GST, Australia Prime Minister John Howard reversed his policy for the 1998 election, saying he was seeking a mandate to implement a 10 percent tax on most goods and services. He barely won amid a voter backlash, but that narrow victory was enough to legislate a GST that’s been used to fund health care and schools funding for the states. It excludes some politically contentious items such as fresh food, pre-owned real estate, and medical and education services. Current Prime Minister Malcolm Turnbull toyed with the idea of increasing the tax to 15 percent, but ruled that out in February 2016.


Following the introduction of a value added tax in 1977, a game of hide and seek broke out between tax officials implementing the new system and market vendors seeking to avoid taxation, prompting newspaper Dong-A Ilbo in 1978 to describe the year as a “365-day nightmare.” The day the indirect tax regime applied, some taxi drivers thought the new system applied to taxi fares and argued with customers that they need to pay 10 percent more than the price on the meter.

New Zealand:

The New Zealand GST, enacted in 1988, was designed as a comprehensive tax base including many difficult-to-tax goods and services. The New Zealand GST became an international benchmark for indirect tax design. For instance, the Institute of Fiscal Studies of United Kingdom considered the New Zealand GST model as the benchmark for evaluation of European VAT Directives.

In New Zealand, GST is governed by the GST Act of1985 and is applicable on most indigenous goods and services, most imported goods, and certain specified imported services at a rate of 15%.

India GST Tax Rates
One noteworthy element though is that GST rates in most of the countries is comparatively lower that of India. India is about to charge GST at one of the highest rates prevailing in the world.

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