GST, or Goods and Services Tax, is a value-added tax levied on the supply of goods and services. It is a comprehensive and uniform tax system that aims to eliminate the cascading effect of multiple taxes, simplify compliance, broaden the tax base, and enhance revenue collection. GST has been implemented in more than 160 countries around the world, with different models and rates. In this blog, we will compare the GST system in India with some of the major countries that have adopted GST, such as the US, UK, China, France, Brazil, Indonesia, Australia, and UAE.
How the Indian GST model compares with GST in other countries
India introduced GST on July 1, 2017, after more than a decade of deliberations and negotiations among the central and state governments. India adopted a dual GST model, where both the central and state governments levy and collect GST on a common tax base. The GST rates are determined by the GST Council, which consists of the finance ministers of the central and state governments. The GST rates vary from 0% to 28%, depending on the type and category of goods and services. There are also special rates for gold, precious stones, and jewellery (3%), and for some agricultural products (0.25%). In addition, some goods and services are exempt from GST, such as alcohol for human consumption, petroleum products, electricity, health care, education, etc. Some goods and services are also subject to a cess (surcharge) over and above the GST rate, such as luxury cars, tobacco products, aerated drinks, etc.
Here is a simpler and easy-to-understand table, that will help you to understand how the Indian GST model is different from GST in other countries:
| Feature | India | Other Countries |
| Model | Dual GST: Both central and state governments levy and collect GST on a common tax base | Single GST: Only one level of government levies and collects GST on the entire tax base |
| Rates | Multiple rates: 0%, 5%, 12%, 18%, 28% + cess, depending on the type and category of goods and services | Fewer rates: Usually one standard rate and one or two reduced rates, or a single flat rate for all goods and services |
| Threshold | Low threshold: Rs. 40 lakh / Rs. 20 lakh for registration, which means even small businesses have to comply with GST rules and regulations | High threshold: Usually in the range of $150,000 to $500,000 for registration, which means only large businesses have to comply with GST rules and regulations |
| Exclusions | Many exclusions: Some goods and services are exempt from GST, such as alcohol, petroleum products, electricity, health care, education, etc. | Fewer exclusions: Most goods and services are subject to GST, with some exceptions or reduced rates for essential items such as food, health care, education, etc. |
The GST system in India is divided into four components:
- Central Goods and Services Tax (CGST): This is levied and collected by the central government on intra-state supplies of goods and services.
- State Goods and Services Tax (SGST): This is levied and collected by the state governments on intra-state supplies of goods and services.
- Integrated Goods and Services Tax (IGST): This is levied and collected by the central government on inter-state supplies of goods and services. The revenue from IGST is shared between the central and state governments according to a formula.
- Union Territory Goods and Services Tax (UTGST): This is levied and collected by the union territories on intra-union territory supplies of goods and services.
The GST system in India is based on the principle of destination-based taxation, which means that the tax is levied at the place where the goods or services are consumed. The GST system also allows for input tax credit (ITC), which means that the taxpayers can claim credit for the tax paid on their inputs (purchases) and reduce their tax liability on their outputs (sales).
The GST system in India is different from other countries in several aspects, the following table summarizes some of the key features of the GST systems in some of the major countries:
| Country | Model | Rates | Threshold | Exclusions |
| India | Dual | 0%, 5%, 12%, 18%, 28% + cess | Rs. 40 lakh / Rs. 20 lakh | Alcohol, petroleum products, electricity |
| US | No federal VAT; state-level sales taxes | Varies from 0% to 13% | $150,000 | Varies by state |
| UK | Single | 0%, 5%, 20% | £85,000 | Financial services |
| China | Single | 0%, 6%, 9%, 13% | RMB 500,000 | Real estate |
| France | Single | 0%, 2.1%, 5.5%, 10%, 20% | €82,800 | Food |
| Brazil | Dual | Varies from 7% to 25% | No threshold | Varies by state |
| Indonesia | Single | 0%, 10% | IDR 4.8 billion | Financial services, education, health care |
| Australia | Single | 0%, 10% | AUD 75,000 | Health care, education, financial services |
| UAE | Single | 0%, 5% | AED 375,000 | Health care, education, residential real estate |
GST is a major tax reform that has transformed the indirect tax system in India. It has brought about uniformity, simplicity, efficiency, and transparency in the taxation of goods and services. However, it also has some challenges and limitations, such as multiple rates, exemptions, cesses, thresholds, compliance costs, etc. India can learn from the best practices and experiences of other countries that have implemented GST and make further improvements and modifications to its GST system.
Sources: 1. cleartax.in 2. blog.saginfotech.com 3. corpbiz.io 4. ebizfiling.com 5. onlinelegalindia.com 6. en.wikipedia.org
